Beginner’s Guide to Finance – Start Saving Now

by Sean Bryant on June 18, 2012

As we have seen the most basic budget is simply getting a feel for how much money is coming in, and how much is going out.  Most people do not like budgets, they are cumbersome, they rarely get followed, and they make people feel bad about their spending habits.  So rather than detail out exactly how much money goes where, many people simply know their cash flow, and make sure to pay themselves first.

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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Sean Bryant

Sean Bryant created in 2011 to help pass along his knowledge of finance and economics to others. After graduating from the University of Iowa with a degree in economics he worked as a construction superintendent before jumping into the world of finance. Sean has worked on the trade desk for a commodities brokerage firm, he was a project manager for an investment research company and was a CDO analyst at a big bank. That being said he brings a good understanding of the finance field to the One Smart Dollar community. When not working Sean and he wife are avid world travelers. He enjoys spending time with his daughter Colette and dog Charlie.

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  • My feeling is that you have to treat your savings like a bill – pay it or else! I started off similar to what you suggest with Ally, but then started using Vanguard. Eventually I built it up into the max IRA contribution.

  • If you don’t want to do anything personal finance related, the best thing to do would be to save save save!!!!!!! I was not saving at all a few years ago, and now I feel so safe and secure knowing that I have built a huge emergency fund. You never know what will happen.

  • This is great and the timing is perfect. I was just looking at our budget yesterday and couldn’t believe how much we’d spent on TOYS this past year! My daughter’s 1st birthday is coming up and we need to get on it. It made me wonder if I’m spending too much on my kids and maybe we should scale back. So yes cumbersome, and yes made me feel like crap. Thanks, budget! Way to be a ball of sunshine!

  • This is good timing. We have been recently looking at our budget and assessing what we can put towards savings and how much we can increase our savings. We haven’t been so good at saving in the past so we need to catch up.

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