Personal Finance Advice

Whether or not you have debt you should still be putting some money away for savings.  How do you know where to put the money? With so many interesting terms floating around - annuities, mutual funds, bonds, FOREX, etc - you might feel a little like you don’t have the slightest idea what you should do with the money you do manage to squirrel away. 

The fact of the matter is that unless you have a great deal of money to put into the bank, you can relax knowing there is a relatively simple savings hierarchy you can follow:

First, build up an emergency fund.  An emergency fund isn’t designed for investing or saving for a down payment on a house.  It’s an interest-bearing account that has no risk involved where you can put some money in case you suddenly find yourself in need of cash beyond what you have in your checking account.  Most financial experts suggest you place at least six months worth of expenses in your savings account.  Money market accounts are ideal for an emergency fund.

The next step is to start putting money toward retirement.  Depending on how much time you have before you expect to stop working you may have many options available to you when it comes to retirement savings.  Once your emergency fund is in place you should aim to put at least 10% of your income toward retirement.  Choose whatever type of account you want for your retirement fund - IRA, mutual funds, etc - but make sure it’s under the umbrella of retirement savings for tax purposes.  Generally, the closer you are to retirement, the less risk you should accept for your retirement savings.

Invest for fun or profit.  Investing can be a hobby, or it can be a way to potentially make money.  The stock market should not be the only place you put your savings because there is just too much risk of losing your money and leaving you without any savings at all.  If you have an emergency fund in place, and you already have 10% of your income going to retirement, feel free to start playing the market as an additional way to save money.

If you are conservative with your money, try a CD or savings bond.  A certificate of deposit from a bank or credit union usually earns an impressive interest rate, but the money is inaccessible for a period of time unless you want to pay fees and forfeit interest.  Savings bonds are also long-term investments, but if you’re trying to save some money for years down the road or simply want to be patriotic, government-issued savings bonds are a reliable tool.

Save for big expenses.  Most banks and credit unions offer savings accounts that are for specific purposes.  Perhaps you want to save money for the holidays, or in a more long-term situation you need to save money for your child’s college education.  There is a savings account for almost every scenario.  Take a look at the savings options offered by your bank or credit union to find out the best way to stash some money away while also earning interest returns.