Saving And Investing
When you're tight on money you probably don't think about saving or investing your money. But, unless you make an effort to save and invest, chances are, it will never happen. Making this effort is called "Paying Yourself First."

We'll show you ways to save and invest that don't cost a lot of money, and more importantly, can help you stretch your dollar a lot further

Basics of Savings Accounts

What is a savings account?

A savings account is when you keep your money in a bank or credit union and earn interest. Interest is the money the bank pays you for keeping your money there.

Putting more money in your pocket

Do you have trouble paying your bills each month? Are there things you think you need, but can't afford to buy? Are you prepared if you have an emergency that ends up costing a lot of money?

Putting more money in your pocket means more than just walking around with a big wad of cash. It means putting money aside each month, controlling how much you spend for things and making good decisions about what to do with extra cash.

What are the benefits of having a savings account?

It's Safe: A savings account is a safe, convenient and affordable way to save your money. It's much safer to keep your money at a bank than to keep a large amount of cash in your home. When you put your money in a bank, the bank keeps it in a fireproof locked safe. The federal government also insures your money. No matter what, you can't lose your money when it's in the bank.

It Pays: Banks pay you a fee, called interest, for keeping your money with them. The higher the interest rate, the more money you'll earn. And, the more money you put into your account, the more money you'll earn in interest. Automatically transferring money from your checking account to a savings account each payday makes paying yourself automatically much easier.

What are the costs of having a savings account?

As with other accounts, a bank may charge you fees for having a savings account. Every bank charges differently, so it pays to shop around. Some accounts are free, and others carry a general service charge. A lot of banks charge you if you do not maintain a minimum balance in your account, but not all accounts have minimum balance requirements. You can save a lot of money in fees by finding an account with low or no balance requirements.

What are the different types of savings accounts?

Banks offer a variety of ways for you to save your money and earn interest. The most common accounts are:

Basic Savings Account
The minimum deposit requirement for a basic account is low, from $5 to $200. Your money earns a relatively low interest rate, but you can put money into and take money out of your account whenever you want. Basic saving accounts are also called passbook accounts.

Certificate of Deposit (CD)
This account earns a higher interest rate than a regular savings account, but you have to make a larger minimum deposit, generally between $1,000 and $5,000. You also have to keep your money in the CD for a certain period of time. If you take your money out before the end of the term, you may have to pay a penalty.

Money Market Accounts
This account earns a higher interest rate than a regular savings account, but you have to make a larger minimum deposit, averaging between $500 and $2,500. This account also limits the amount of times you can take out money each month.

Where can I open a savings account?

You should shop around for a financial institution that meets your needs. Look for a bank or credit union that is close to your home or work, open during the hours you need it to be and charges low or no fees for a savings account. Banks and Community Development Credit Unions (CDCUs) are the safest and most affordable places to open savings accounts. Banks that offer online banking, make managing your finances very easy.

What's the difference between a bank and a Credit Union?

Banks store your money, and allow you to have easy access to it by writing checks or using ATM and debit cards. Banks insure your money with The Federal Deposit Insurance Corporation, which protects your account up to $100,000 if the bank goes out of business. There are banks all over the country.

Credit Unions work like banks, but are nonprofit organizations. This means that you are more likely to get a loan, and get it at a better interest rate. Credit Unions are created for specific groups of people, like government employees or college graduates. Another kind of credit union, a community development credit union (CDCU) primarily serves low-income communities. Anyone living or working in those communities can join the CDCU serving that area. CDCUs are located in more than 300 urban and rural areas across the United States.

How do I manage my savings account after I open it?

The key to managing any bank account is maintaining good records. Your register is a tool for keeping track of the amount in your account, or the balance in your savings account. You need to write down every transaction - deposits, fees and withdrawals - in your register so that you'll always know how much money is in your account.

At the end of each month, you'll receive a statement of your account's activity from the previous month. You can use the statement to balance your account by comparing your register with your account statement. After all financial transactions have been recorded in both places; the balances should be the same plus the interest you earned from the bank.

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