April 20, 2009
A Resurgence of Savings-Account Popularity
Like a pop diva returning from a lousy two years with the paparazzi, saving up has become popular again. More and more Americans are worrying about the stability of their jobs; so many people have begun filling up their personal savings rate with a substantial amount of their salaries again. Investors, on the other hand, are hiding their money elsewhere rather than put it back in circulation; and they lie in wait for the rainy days to stop. Interest rates have struck record lows, however, so one must be aware about where his or her funds are stored. Here are a few pointers:
1. Store your money in more than one place. There are four ways to save up your money, and each option is suited for a particular type of spending. Groceries and other necessities would be best for a checking account, while emergency funds can be placed in a secure but not too convenient account. Waiting for a day or two to withdraw funds from this account is fine. Savings that are kept for a specific purpose can get higher yield if they’re in a certificate of deposit that will only mature when the time is right. Then, your investment money may be best for a money-market fund. But this may not always be the case.
2. Even in these times of financial crisis, it’s okay to spend a bit. The government is willing to help. If you have emergency or special-purpose funds, you don’t need to go for a local bank’s low rates. You can entrust your money to accounts that are insured by the Federal Deposit Insurance Group.
3. A yield of 2% is really not as bad as you may think. But, if you’re someone who lives off your investment income, then it may be a bad thing for you. But, if you simply want to stay afloat of the price inflation, a 2% yield will do just that.
4. If you’re scared to go into new investments because of the fluctuating status of the market, then you may want to consider some higher-yielding choices. While they may lose money, high-quality short term bonds will yield a lot of returns. Stable-value funds will gather up bonds, too, but there is an added insurance cost to it.
Filed under Finance by Rick Amorey
