The Amateur Financier

(Once again, I have the opportunity to share a well-written guest post here on the Amateur Financier.  This week, we’re looking at a lesson that everyone needs to know, but many people have trouble getting: how to save.  It’s not the sexiest of financial topics; you won’t compete with the talk of hot stocks or daring options investments at the next cocktail party, but you will have a better personal finance life if you get your saving habits down pat.)

Making the most of your savings is a combination of good habits and established savings accounts. In these tough economic times you may not think you have the resources to put back as much money as you would like, but now is the time to do exactly that.

Perhaps you don’t have your grandfather’s natural financial savvy. That’s okay. Solid habits can be developed in as little as a month if you’re consistent.

First of all, evaluate your current savings plan. If you don’t already have one, click here to research your options.

You probably already have a basic savings account with your bank or credit union. It may not have an adequate balance, but that’s okay. You can start to build it now that you’re getting serious about saving.
Make sure that your savings account offers a competitive interest rate. Do this by researching local banks and credit unions to find out what rates they offer. You want the best rate so you make free money, no matter how little that free money may be.

Look into high interest savings accounts. These accounts are set up so that, as your money is saved in the account, competitive interest grows. Online banks are great sources for this type of high interest savings plan.

A money market is another account you may want to consider. Money market accounts are offered by your bank and work much like regular savings, although you will be limited in how many withdrawals you can make a month.

A CD, or certificate of deposit, is another smart option and perfect for first-time investors. This is because the money you put into a CD is off-limits for the predetermined amount of time. You basically have to put it in and forget it.

Once the CD matures, you’re free to withdraw the money or invest it in a new CD. It’s simple moneymaking.

Keep more money in your pocket (or account) by avoiding late and unnecessary fees. If your bank charges you for every transaction at the ATM, forego the ATM altogether.

Set up your bills to be automatically deducted from your bank account each month. Let’s be honest. It’s not easy to keep all those due dates straight. Setting up automatic payments saves you money in potential late fees.

Avoid banks that charge you for things you should be enjoying for free, like debit cards or checking accounts. You may be able to avoid certain fees by having your paycheck set up to automatically deposit in your account each month.

You’ve heard the saying that time is money and that’s certainly true in investing. The longer you allow your money to grow in an account, the more money it will make. This means leaving savings and retirement accounts alone for quite a while, so don’t be tempted to withdraw money if you have a long-term savings goal in mind.

Those that want to get aggressive with investments, such as take advantage of stocks and foreign investments need to spread their money around to cut down on risks. This is called diversifying your portfolio.

No matter the savings or investment plan you choose, evaluate your savings at least once a year to determine the next course of action. You can decide if it’s time to switch to a different savings account, put more money in each month, or up the ante a little for some more aggressive investments.

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