Some tips on saving your money
I know some of the people( myself included ) on this site have only recently started working full time, so it seems rather apropos to start off this category by writing a little something about savings. According to my own semi-serious research on the web, magazines, etc., it seems essential that anyone should have a significant saving before he/she starts investing. The size of the savings varies from person to person, of course, but according to MSN Money, having $30-50k immediately accessible accounts is a good idea. Now, that may seem like quite a bit of cash being set aside as a rainy day fund; but in case of emergencies, such as losing your job, sudden illness, etc., you still have to pay your rent, your bills, this fund should help you weather the storm comfortably. It is therefore absolutely vital that once you have your savings established, you never touch it unless there is an emergency. And no, having no money to buy the new PS3 console isn't an emergency. A Savings Account is great, because you will earn money risk-free; whereas the returns on stock investments may be high, the risk associated with the investments isn't something you want, especially since you have no money to start out with. This brings us to the next question: what kind of savings account should you get? A regular checking account certainly is no good; it gives you no interest rates so your money isn't doing work for you. A regular savings account has meager interest rates, so it is not much better either. Conventional wisdom tells us that we should put money into a Certificate of Deposit( CD ): it's like a savings account, except with much higher interest rates. The downside is, the money you put into the CD is locked until the maturity date. This means that while your money may do more work for you risk-free, you cannot use any of it in case of emergencies, without penalties for early withdrawl. Certainly there are strategies for CD investments( called the Ladder CDs ) where you start multiple CDs and have their maturity dates carefully timed so that you get access to parts of your CDs at different times throughout the year. But we all know that emergencies always happen between CD maturity dates, so CDs aren't that great as rainy day funds. Believe it or not, there is such a thing as a high-interest savings account. Typically its interest rates are only slightly lower than CDs, but much, much higher than traditional savings accounts. The only non-shady financial institutions that I found which offers high interest savings account is ING Direct. It charges no fees, has no minimum requirements. Frankly, it sounds too good to be true. At this time I am still doing more research on ING Direct, but I am extremely tempted to open an account with them. More to come. -風水.李
