Current savings account rates are pathetic these days and probably won’t move higher until the end of 2013. The best savings account rates or money market account rates right now are just above 1.00% and it seems like every day another bank or credit union is lowering their savings rates.
If you’re just starting out saving and looking to get ahead with your financial planning for a lifetime you will need to plan out the next 50 years and figure out how to have the retirement you want. Saving and investing wisely for the future is something you constantly have to do. One also has to save more each month to have the kind of nest egg our parents had since the stock market hasn’t returned anything at all the past ten years and deposit account rates like CD rates and savings rates pay so little.
Think you can get better rates on jumbo savings accounts or long term certificates of deposit? Well, don’t count on it, jumbo savings rates don’t pay anymore than regular savings account rates. The highest CD rates on certificates of deposit on 5 year CDs are less than 2.50%, if you’re lucky to find CD rates that high.
My parents had an unbelievable return investing in certificates of deposit and savings accounts. Back in the early 1980’s the highest savings account rates were in the double digits, ditto for 1year CD rates.
Stock market returns in the 80s and 90s were also around double digits if you invested in the right mutual fund. Your parents probably also received those kind of returns, maybe one day we will too but don’t count on it the next 5 years.
The first step to starting a savings plan is to figure out where you stand with your current savings and debt. Start that emergency savings account and pay off higher interest rate credit card debt.
I say along with the experts say it’s also important for young people to start saving money yesterday so they can get to their long-term goals and dreams. Buying a home is probably also a dream so start saving money for that purchase. If you can move now on buying a home do so, current mortgage rates are also very low, you can get a 30 year loan at around 4.00%.
So you need to do a combination of saving, investing and paying off debt. Over time you could be charged higher credit card rates or other loans if your debt is too high. My suggestion to get started on saving is to open a savings account with the highest savings rate you can get. Search and compare savings rates online to get the best savings rates.
Keep track of your spending each month set a budget and stick to the budget. Pay yourself first; set aside a percentage of your paycheck automatically each and every month. How much you can save is up to you and place that money in a savings account or money market account.
Everybody makes mistakes with their money and just opening a savings account at a local bank, but it is important to compare bank savings account rates and credit union savings account rates.
Learn to be a good money manager by following the basic strategies outlined in this article. Again, you need to constantly stay on top of your investments. Don’t stick your head in the sand or not open your 401k statement if the market has been going down.
Here is our list of the top mistakes young folks make with their money, and what you can do to avoid these mistakes. Open a money market account or savings account but before you do so compare money market account rates against savings rates and place your money in the highest interest bearing account.
Pay the entire balance on your credit card or as much as you can to avoid or minimize credit interest charges, which can add up significantly and you can end up paying more in interest than you originally charged.
Spending money for something you really don’t need can be a big waste of your money, instead place that money into a savings account. Again, the easiest way is to arrange with your bank or employer to automatically transfer (ACH) a certain amount each month to a savings account, again a higher interest bearing savings rate account. Start with what you can, $10 or $20 if that’s all you can afford is a start, than increase the amount when you feel comfortable doing so. That means even before you pay your bills each month you should put money into savings for your future.
Find out what your credit score is if before getting a car loan or mortgage loan, for information about your rights or to obtain free copies of your credit report, go to the three major credit bureaus online.
The best step is to paying yourself firs, then pay bills, obviously you don’t want to get into a situation where you can’t pay your bills by paying yourself first. The important thing is to start saving as early as you can. Place that money into a deposit account and don’t touch it.
Even saving for your retirement when that seems light-years away you can benefit from the effect of compound interest even with these low savings rates. You need a balance of paying down credit card debt and saving. If you pay only the minimum amount due on your credit card, you may end up paying more in credit card interest charges than what the item cost you to begin with.
Savings bonds also have low interest rates these days, in fact lower than the lowest bank savings account rates or bank money market account rates.
If you’re in college and just starting out using credit be careful of card companies aggressively market their products on college campuses, digging a hole for yourself with too much debt is a bad way to start out in life.
Not saving for your future is the biggest mistake you can make, remember the benefits of compound interest over time. Every time you have an urge to do a little “impulse buying” don’t do it, place that money in your savings fund. Use one credit card and manage your buying.
To sum up, the first place to start is comparison shop for savings account rates and start saving money automatically in your new account.