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.

While a lack of liquidity in the credit markets are providing a natural break in spending, many Americans are also tightening their belts with the prospects of recession on the horizon.  Consumer spending has slowed considerably over the last few months and it’s having a noticeable effect on the economy.

It is unfortunate that it takes this kind of situation for people to finally start thinking about saving money.  The amount of debt we have in our society is ridiculous.  For many people, their idea of budgeting is the limit on their credit cards.  The government is no better with the national debt at $9 trillion and rising.

It can be difficult to save money in our over commercialized society.  We are being constantly bombarded with marketing spam at every level, when you watch television or surf the web, we even get it from text messages on our cell phones now.

As ridiculous as it sounds, the current economic climate actually seems to encourage more debt.  Rising inflation and low interest rates greatly favors debtors rather than savers.  This can be misleading however, since our economy doesn’t exist in a vacuum.  With the dollar falling to record lows, the relative wealth of our economy compared to the other nations of the world is taking a serious beating.

It is really the savings rate of a society that builds up wealth over time for an economy.  Over the years, our society’s savings rate has dwindled and the accumulation of debt has grown to epic proportions.

As much it would help the economy for us to spend our way out of a recession, is that really the best thing for us as individuals or as a society?  Debt and credit can be powerful tools to help leverage your financial situation, too much of it however can be disastrous.  You need only look to our highly leveraged financial system to see how that is working out now.

How is your child with money?  Do they spend all their money or are they able to save some of it?  Many of us had allowances when we were growing up or had a part time job after school or on weekends which helped us become aware and learn the importance of saving what we earn.

My oldest sister helped me open my first savings account when I was about 10 years old when my family felt I was old enough to have control of the money I had received from birthdays and various holidays.  I remember being excited about opening my first Certificate of Deposit, of course it didn’t hurt that I was getting 12% either not really knowing all that much about inflation at the time. 

As I grew older and got my first job I would usually spend about half of what I earned on video games or hanging out with friends and saved the rest.  By the time I went off to college I had quite a bit saved up and was able to live very comfortably while my friends were surviving on ramen noodles.

Every situation is unique and no matter what your financial status is don’t be afraid to discuss the issue of money with your child.  Many of you must be thinking I don’t want my child to have to worry about money at such an early age but even if you don’t discuss money with children, they will eventually see how you act with money, but will have less understanding in the long run. 

Once you have brought up the topic of money with kids, set a goal that they are able to reach. Perhaps providing an incentive if they save a set amount  of money over a certain time period.  Even if your children fall short of reaching this goal, try to provide encouragement.  Let them spend the money they saved if there was something in particular they were trying to save for.  This will give them a sense of accomplishment. 

Learning how to act wisely with money today can help shape their future spending habits as an adult.