Your first step is establishing a
savings account. You
can do that when you open your checking account, or come
back and open it later. However, like credit, you should
shop around for a savings account. You want to find one
that doesn’t charge a fee for low balances. Some
banks require beginning deposits of at least $100 or more
for free savings accounts. Ask an employee at your bank
if they will use the combined balances of your checking
and savings accounts to meet any required minimums. Use
the Savings Account
Comparison worksheet to help make your decision.
Regardless of where you decide to open your savings account,
the bank, savings and loan, or credit union will most likely
require one or more of the following:
- A completed application
- A government-issued piece of identification
with your picture on it, such as a driver’s license
- Social Security Number (some may ask
for a copy of your card)
- A minimum deposit to open the account
- Some may require that you also have
a checking account and others may run a report on your
credit history
Once you’ve established your account, you’re
ready to start paying yourself. Consistency is the key
to building a savings account. Try to save regularly. One
way to do this is to think of your savings as a weekly
or monthly bill you pay to yourself. Consider including
your savings “bill” in your budget and making
it the most important bill you will pay every month. Set
specific short-, medium-, and long-term goals. Decide what
it is you really want—a new sofa, a car, or maybe
a college degree. Whatever your goals, a savings account
is a good place to keep the money you’ll need to
pay for them.
Emergency Fund
Cars break down and need to be fixed; family and friends
get sick and need care. Maybe you’re asked at the
last minute to go on a long-desired trip or to attend an
event. These are good reasons to save money in an account
to pay for unexpected problems and opportunities.
| How much money should you set aside? Money experts
say you should set aside enough money to cover at
least three months of living expenses. Don’t
expect to come up with that much right away. Just
make sure part of your income routinely goes into
saving for the unexpected. Because these events happen
suddenly, you need to be able to get to your money
quickly. Also, you don’t want to take a lot
of risks with this money because you may need it
at a moment’s notice. |  |
Saving for Short- and Long-term Goals
Short-term goals are those you want to accomplish within
a year or so. Two types of accounts are good choices for
short-tem goals: savings accounts and money market accounts.
Another option is a certificate of deposit, better known
as a “CD.” A CD offers higher rates of interest
than a regular savings account in exchange for locking
your money up for a set period of time. The longer the
CD, the higher the interest rate earned.
Long-term goals are more than one year away. Since your
goal is farther down the road, you may be willing to take
more risk. More risk may mean that your investment earns
more money than it would in a savings or money market account.
It also may mean that your investment loses money.
Investments go up and down in value depending on many
things, such as:
- How well the businesses in which you
have invested are doing
- The health of the overall economy
- World events
To learn more about different types of investments, visit
the Types of Investments section
of this Web site.
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