You should have a savings account. Everyone should have a savings. If your a parent you should first have a savings account for your self and you should set up a savings account for your child. Financial education is not taught in schools. It is up to you to educate yourself and your family about money.
Money equals emotions. Everything about money is emotional. If you are going through a breakup or divorce or death in the family you should not make any big money decisions. Wait for some time to pass when life calms down to make big money moves. Unless those money moves mean paying down personal debt. Paying down personal debt should always be your first priority.
Your savings equals security. You should make it your mission to have an 8 month emergency fund. Having money set aside in case you lose your job will give you options. It does not feel good to be backed into a corner and have to take any job to make ends meet.
I was once in a relationship where we lived together in a small house. One day my last grandparent died, my job let me go and my boyfriend broke up with me. Since we lived in a house I could no longer afford the rent by myself. I was devastated. So I decided to move out and move back in with my parents till I could find another job that would support a single apartment.
If I had set up an emergency when the money was rolling I would have had more options to take care of myself. That’s where your savings account comes in.
You should a checking account for everyday spending. Then you should have a savings account where you store more money so you can earn higher interest on your money.
- The principle of compounding – Your savings account has an interest rate. That changes based on the Federal Interest Rate. Your interest is calculated every month based on the amount you have in the account. Every time you get paid interest the next month you will get paid based on the current amount. Every month you should get more and more interest indefinitely. And if you continue to put money in your account from your paycheck it will grow even faster.
- Interest rate – Always be earning. All banks are not created equally. There has never been a better time to shop around banks and interest rates. You should always be searching for the highest interest rate possible. The higher the rate the more money you will make each month. The snowball effect
- You make money and banks make money – Banks pay you interest on your savings in order for you to invest with them for several reasons. Banks are required by law to keep a certain amount of money on hand and deposited with the banks. The other and more important reason is how they make money. You deposit your money and they loan out money to other people for homes and businesses at a higher interest rate like 4 or 5 percent and then pay you interest at 2 or 3 percent. They keep the different as profit.
- Passive income – Your money should always be working for you. Savings interest is pure passive income. Your business is yourself. You should always be looking for ways to increase your income producing assets. Much like dividends, savings is is pure passive income. You don’t have to do anything to earn the money.
What to look for in a savings account
- Highest interest rate possible
- no monthly fees
- Easy, unlimited withdraws
- Automatic transfers
The biggest reason to have a savings account is piece of mind, especially if you have a family. What happens if you lose your job, or get in an accident, or get sick and cannot work? You will need something to fall back on.
I am a child of the 2008 recession. I came out of college in the worst economic times. There is no such thing as job security or loyaltly. You have to protect yourself first. Because a company will save itself before it saves you.
I recommend having 8 – 12 months worth of living expenses saved in your account in case of an emergency. Your main mission should be to find the highest interest rate possible, otherwise you are giving money away. Do a comparison search to find the best deal.
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