Saving Money The Old-Fashioned Way
Saving Money Needs To Become a Priority Once Again
Saving money was a financial necessity for our grandparents, before the era of unlimited credit opportunities. While people used to save money in anticipation of buying anything that was not regularly budgeted for, it is now easier make the purchase with credit and pay it off over time. Making too many payments every month means that little money is left over for putting into savings, thus perpetuating the need for more credit to make future purchases.
What Do The Experts Recommend?
In light of this trend, financial advisors emphasize establishing healthy savings accounts, preferably by directly depositing the funds into a little-used, high-interest account. This way, you don't see it (and therefore don't miss it), while it earns maximum yields.
A common place to start is by creating an emergency fund. This account should have an amount equal to three to six months salary (three for a two-income household, six for a single-income household), in the event that you or your spouse is unable to work. Having this safety net helps to ensure that your family does not go deeper into debt during a period of reduced income.
Other important considerations for savings are retirement accounts, college funds, and rainy day savings accounts. Although it may seem easier to bypass contributing to these accounts during times of financial difficulty, experts rarely recommend this, especially for retirement accounts.
The short-term benefit of paying down debt faster rarely outweighs the long-term benefits of establishing and contributing to a retirement account regularly -- especially if your employer matches your contributions. You can stop putting away money in college funds and rainy day savings accounts when money is tight, but it is best to begin saving again when your budget is less restrictive.
Regularly placing money into a savings account, especially one that offers a high interest rate, makes it readily available in the event of an emergency or planned purchase.
Few other options are as liquid as savings accounts; despite the rampant availability of credit, they are still an important part of saving money, planning a strong financial portfolio and maintaining your financial soundness.