Making Your Money Work For You: Part 1

by Justin Weinger on December 17, 2009

dollar_sign

Making Your Money Work For You: Part 1

I spend most of my time telling you about all the coupons, samples and deals that I find with the hopes of being able to save your family money.  This is only part of the process to help increase wealth.

As a former banker I have always loved helping people make money.  Even though I worked with corporations investing in alternative investments and not individual investors like you and me, I still like sharing my knowledge with my friends and family.

I am going to start with basic topics and I will eventually get into deeper issues.  This week I am going to cover the importance of savings accounts.

After talking to a group of friends a few years ago I was in shock that over half of them didn’t have a savings account.  A savings account is one of the easiest ways to earn a little extra income just by letting your money sit there.  Even with interest rates at starving levels of about 1% you can still make a little extra cash each year.  Two years ago online banks such as ING Direct or E-Trade had interest rates close to 4%.  If you have $10,000 to place in savings that is an extra $400 each year that you can use for a vacation or that new countertop you have been wanting to put in your kitchen.

One of the rules I have for myself is that I never keep more than $2,000 in my checking account at one time.  My checking account earns me 0% interest so why keep more than I have to in it.  I place the rest in an ING online account that is linked to my checking account.  This way I can easily move money around to different investment accounts or back to my checking when needed.

As an example I am going to say hypothetically you have $25,000 sitting around in your checking account.  After 20 years in a checking account you would still have just that $25,000.  Now lets say you place the money in a online savings account.  Lets use an average 2% interest rate over a 20 year period.  At the end of the 20 years your $25,000 would be worth $37,148.68.  I don’t know about you but I like the sound of an extra $12,000 from a completely risk free investment.

So to wrap things up you need to start putting your money to work for you.  Whenever you put your paycheck in the bank you are letting them lend that money out to other people.  Make sure you are getting as much in return as you can.  There is a big difference between $0 and $12,000.

Disclaimer: This post may have an affiliate link. See our disclosure policy for more information.




{ 7 comments… read them below or add one }

Jan December 17, 2009 at 7:30 PM

$10,000 at 4% earns $400 a MONTH???

contact December 17, 2009 at 7:32 PM

That would be a typo 🙂 its $400 a year

Faith Williams December 17, 2009 at 8:55 PM

thank you so much for this.it really helps me put things in perspective, its hard to realise some of the adavntages unless they are spelled out for you. I only wish i had your talent for saving money! I’m learning!

contact December 17, 2009 at 9:00 PM

Learning is the first step. Just think of it this way a few bucks here and a few more there can really add up in the long run. Its the little changes such as the checking account vs savings account that can make a pretty big difference with little to no work.

lynn December 18, 2009 at 11:52 AM

Looking forward to the series – THANKS!

Nicole December 18, 2009 at 7:13 PM

Nice series. Some checking accounts (Navy Federal CU) do earn a little interest, but definitely not more than savings accounts. I would also recommend if you keep a significant amount in savings to consider investing in a money market. We make more than double in our money market account and only have to keep a minimum $2,500 balance and can withdraw money whenever we need it.

contact December 19, 2009 at 11:43 AM

Money Market account generally offer the same interest rates as most online savings account today but they don’t usually offer as high of a rate when the Federal Reserve raises rates.

Leave a Comment

Previous post:

Next post: