By
Miranda Marquit
Monday, July 12, 2010, 06:00 AM
Category:
Money Matters
You know that you should be saving more money. However, it can be difficult to take those first steps. The task of setting up an emergency fund can seem daunting, and retirement seems a long way off. If you want financial freedom, though, it is important to make saving a priority. If you are having trouble finding the motivation to save, you might consider these tips, designed to help you get started with a savings account.
Start Small
You don't need $10,000 to open a savings account. You don't even need $1,000. And it doesn't matter if you can only put in a few dollars a week. The idea is to start a habit of saving, and that might mean starting small. Take what you can, and open an account with at least $25. Then, add what you can to it each week. Look for small ways to save money every day, so that you can put more into savings.
You should start now, though, because the earlier you start, the longer your money has to grow.
Go High Yield
It can be depressing to see the return you get on the money in a savings account. (Although 0.75% is better than nothing at all.) If you want to feel better about the interest you are earning, consider opening a high yield savings account. Find an account with no fees and (if possible) no minimums. Put your money in a high yield account so that it grows a little faster, and you will feel better about leaving it the account.
Another goal is to open a retirement account so that you can invest and receive even higher yields. Over time, these investments are more likely to provide you with a comfortable income than saving cash only. You will still want some cash, for liquidity and safety, but eventually you will want to diversify into stocks and bonds as well.
Add a Little More
As you get used to setting money aside, and as your income increases, you can start adding a little more to your savings account. While you may not start out saving at least 10% of your income, the goal is to eventually work up to it. You want to be able to gradually increase the amount of money that you set aside, so that you will have a larger nest egg in the end. Examine your financial priorities and goals, and make a plan to increase your savings so that you can meet your goals.
-- Miranda
image source: sxc.hu
By
Miranda Marquit
Monday, July 05, 2010, 08:12 AM
Category:
Money Matters
For years, banks have had standard overdraft protection policies that allow you to overdraw your account for the sake of convenience. It's why your debit card transaction goes through on that $19.99 Blu-ray when you only have $12.00 in your account. And why you can still get that $2.50 bagel when you are already $7.99 in the hole. Of course, this "generosity" comes with a price: Each transaction that is overdrawn comes with a fee of between $25 and $40, depending on your bank's policies. This type of standard "protection" has been the norm, which means you have been enrolled whether you want the service or not.
However, all of this changed on July 1, 2010. For those opening new accounts, it will be necessary to opt in to standard overdraft practices. (For existing accounts, you will have to opt in by August 15, 2010 in order to continue receiving standard overdraft "protection".) Now, if you do not specifically opt in to these overdraft practices, your debit card will be denied if you don't have enough money in your account. While this can be embarrassing, it's probably actually for the best.
(Note: The changes in overdraft rules do not apply to ACH automatic billing transactions, or to checks that you write. These can still result in overdrawing your account -- and in fees.)
Don't buy banks' marketing tactics
Banks make billions of dollars a year on overdraft fees. This is why many of them are aggressively marketing these overdraft practices as "protection" for your account, and playing up the convenience side of this "service". They want the fees. (And you might see fees head even higher if banks want to protect their revenue even more.) However, don't buy it. You really probably don't need overdraft protection.
Instead of relying on the bank to allow transactions even though you don't have money in your account, modify your spending habits. Keep track of your balance, and be vigilant about what you have in your account. Personal finance software can help you organize your finances and keep up to date with all of your expenditures and income. If you have a spending plan, and you keep track of your cash flow, there is no need for overdraft protection, since you won't be overdrawing your account.
-- Miranda
Image source: sxc.hu