Throughout one’s life, many things will go exactly as they were not planned. Medical bills will pop up, houses and cars need repairs, children often come as surprises, and a whole host of other money costing events will happen. When they do, it is important to have an emergency fund to fall back on. For those who do not have anything yet, Ally Bank and ING Direct have great programs that offer competitive interest rates. In order to get a feel for how easy saving is, start with just $25 per month. After a month or two to get comfortable with that amount, increase it by $10. After another month or two increase again. Just about any online savings account will allow for automatic deposits, so set it up, and then forget it.
There are quite a few different places to save money. Heading to the local bank or credit union will be the easiest place to start, but they usually also pay the least in interest. Instead, online banking has become a popular choice. It reduces the overhead costs of the institution, and allows them to pass along the savings, in the form of interest, to the consumers. Many people like to put their money into CD’s, but for an emergency fund this is often not a great idea. CD’s lock in the money for an extended period of time, but charge a fee if the money is accessed sooner than the end of the term the saver often forfeits the interest the money has earned. Instead an online high yield savings account, will offer the borrower the best interest rates, and the most liquidity to their money. The most important thing to remember is to check and make sure the account is FDIC insured.
Starting a savings account is pretty easy. Internet banking allows the account to be opened easily, deposits set to automatic, and the individual just has to allow the money to accumulate. It is important to note, however, that saving and investing are two entirely different things. Saving is storing away money, risk free, for easy access in the event of that an emergency (or often an opportunity) happens. This emergency fund is an important part of any financial plan, and is needed so that the individual does not have to dip into investments if something comes up.
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