Some people may say, ‘Why save? Interest rates are so low!’ While today’s low interest rates on deposits may dampen the desire, it’s essential to stay focused on this as a financial goal for long term stability. And as the economy improves interest rates will go up. Of course, it’s anybody’s guess of when that will happen.
When I teach basic financial management classes, I always encourage savings by thinking of savings as ‘paying yourself first’. Savings do not need to be large amounts. A common way to get started is by saving loose pocket change. Keeping a jar or other container handy for collecting can reap benefits fast. Periodic depositing the money into a bank or credit union account to earn interest takes advantage of compound interest. Even small amounts of interest help to build a safety net for when ‘life happens’ or to achieve the planned financial goal.
Remember that there are many savings products available to fit your needs. You can shop for the best deposit rates for certificates of deposits (CD) and other savings accounts using various publications and the internet. Just be sure you are comfortable with all the terms prior to investing. A CD laddering approach, in which your savings are divided into several CD’s with differing maturities, is a good way to combine the higher rates of longer term CD’s with shorter-term CD’s. And if you are looking at an online account, since they often offer higher interest rates, make sure the account is FDIC insured.
Find the savings method and product that meets your needs. Keep in mind saving money is ‘paying yourself first’.