Did you know there are plenty of ways to save money? To get technical, saving means “to lay up money as the result of economy or thrift” and “to be economical in expenditure”, according to Dictionary.com. Saving doesn’t just mean putting money into a savings account. There are so many ways to save and we want you to be knowledgeable of them! Who knows, you may already be saving money without realizing. The CGS Team is sharing all of the ways to save so that you can expand your fortune and diversify your savings.
Popular ways to save…
One of the most common ways to save is by putting money in a savings account and not touching it. Whether you are saving for something specific, or saving just to save, a bank account is one of the best options. The reason why saving in a bank account is so highly regarded is because you make interest off the money you have in the account.
The more you have (and the less you touch it), the more your money grows. However, common banks like Chase and Wells Fargo offer extremely low interest rates on savings account. Consider putting your money in a credit union or online bank to get the most bang for your buck. Check out the article The Skinny on Online Banks for some more great information on high interest savings accounts.
A 401k (or IRA) is the best way to save for retirement. Putting a percentage of your paycheck into a retirement plan is a form of saving. The beauty of a 401k is compounding interest. Since a 401k or IRA is not to be touched until you retire, the early you start saving, the more money you will have come retirement.
Some plans offer account holders to take loans or pull from their 401k early, this is not a great idea. Not only are you taxed on the money you take, but you usually have to pay it back with interest. Yes, you are paying yourself interest, but it’s probably not as high as the interest you could be earning by having a higher balance in your account. If you have a full time job and you are not saving in a 401k, start immediately! Read 7 Reasons to Save for Retirement Early now to see why it’s so important.
Certificate of Deposit (CD)
If you have some extra cash and don’t need it for a set amount of time, saving in a CD is a great option for getting a return on your savings. Most banks offer higher interest rates with their CDs as opposed to general savings accounts.
You pick a certain amount of time to have money in your CD and you earn a specific interest amount during that time. Like a 401k, a CD is not to be touched. Pulling your money out early can result in fees higher than what you would make in interest. If there is a possibility you will need the money before the length of the CD is complete, opt for another savings option.
Some people put cash under the mattress, in a safe deposit box, or in an envelope at home. Keeping cash is definitely a form of savings, but not the best. By keeping cash (in any form), you are not gaining interest. That means you are losing out on potential earnings that could be made by having your cash in an account.
If you need cash on hand, for whatever reason, then setting your specific amount aside is what you need to do. If you don’t need cash handy, then it should not be your go-to form of saving. You can make so much more by investing or putting it in a high interest savings account.
Investing your money in stocks, bonds, and mutual funds is another form of savings. Whether you manage the investments yourself or you have an adviser investing for you, the potential to earn a profit definitely higher when it comes to investing. Unfortunately, there is a chance you can lose money too.
A stock could double up in a day, this means the money you have invested in the stock will double as well. Vice versa; if the stock loses half its value, then the money you have invested loses half its value as well. Investing can be risky, but it can also be rewarding. Read the article Finance 101: An Overview of Investing and Investment Strategies for more information. If you have the cash to spare, it would be worth giving it a shot!
Owning your own house, car, boat, plane, or other tangible assets add value to your net worth (assuming you are not underwater on your loans). By taking care of your assets and paying them down, you are essentially saving yourself money down the line.
When your home is paid off, the money you were putting towards the mortgage could go to something else. If you sell your car at a profit, you are profiting from the asset. Assets are tricky though, you may be investing in something that is valuable to you, but not to anyone else. In this case, you aren’t saving.
With all of the savings options available, there is no reason why you can’t get ahead! Start by taking it slow with one or two forms of saving and eventually work your way up. Having a savings not only provides comfort, but it can be a financial rescue in case something happens. What ways do you save your money? Are there any forms of saving that you are hesitant to try? Share your thoughts by leaving a comment below!