“The art of Saving is income not spent, or deferred consumption. Methods of saving include putting money aside, for example, a deposit account, a pension account, an investment fund, or as cash. Saving also involves reducing expenditures, such as recurring costs. In terms of personal finance, saving generally specifies low-risk preservation of money, as in a deposit account, versus investment, where risk is a lot higher.”
Being able t o save money takes a lot of discipline. We see the money, and we want to spend it. Of course after all of our bills, and other priorities are taken care of. However, putting a little away for a rainy day, can go a long way. The rule of thumb is to save 10% of your income. The 10% should go into some sort of a Savings account, or an account separate from one that you use daily. It is recommended to save money, in a specified Savings account because they are interest bearing. Not a good idea to put the money under your mattress, or bury it in the backyard. Who has time for that? We are here about being convenient and smart.
Different Types of Savings Accounts:
- Regular Savings: an interest-bearing deposit account held at a Financial Institution that provides a modest interest rate. Financial Institutions may limit the number of withdrawals you can make from your savings account each month, and they may charge fees unless you maintain a certain average monthly balance in the account.
- Money Market: is an interest-bearing account that typically pays a higher interest rate than a savings account, and which provides the accountholder with limited check-writing ability. They also typically require a larger deposit amount.
- Certificate of Deposit (CD): a savings certificate with a fixed maturity date, and a specified fixed interest rate, and it also can be issued in any denomination aside from minimum requirements
The idea is to keep the money in your account until it is absolutely needed, or you have reached the goal for a certain item. One thing that helps me is having an account in another state without an ATM card. That way I can not be tempted to go and spend frivolously on things that aren’t needed. I wouldn’t recommend having your Checking and Savings relationship together, it makes it too easy to do a transfer. If you can not do what I do, consider having your Savings at a separate Financial Institution, also no ATM cards! Make it harder to retrieve money, so if you go through the trouble to retrieve your funds it was absolutely necessary.
Different Reasons to Save:
- Homeowner Expenses
💡 When saving you tend to have larger balances. Keep in mind the FDIC insures up to $250,000.