savings

Are Credit Unions Better Than Banks?

January 12, 2016 By Amanda Blankenship 2 Comments

Many people have become fed up with banks’ behavior and fees. A large number of people have been looking into alternatives. Banks seem to be losing popularity with more and more people looking into credit unions each year. However, are credit unions really offering you the best rates and the best services?

What is a Credit Union?

Credit unions are financial co-operatives that are owned and controlled by the members of the union. There are no shareholders with a credit union taking any cut and credit unions work to specifically benefit the credit union members. Credit unions are popular for their savings accounts and low loan rates on cars and mortgages. They were originally meant for people who shared a “common bond,” meaning they lived in the same area or worked for the same company. However, in recent years, credit unions have opened up to servicing just about any group of people.

Credit Unions are Great for Saving

If you are looking for a savings account, you may want to take a closer look at credit unions. In fact, the majority of unions pay out 2.5 percent gross dividend or more on their savings accounts, which is much better than your standard bank savings account. In addition to opening up credit unions to a wider variety of people, they’ve also changed the way they “multiply” your money. You can open an account that pay out dividends or pay out interest on your savings, which is very different from a “normal” bank.

Looking to Borrow?

Taking out loans is extremely easy and user-friendly through credit unions as well. When you take out a loan through a credit union, they obviously take a look at your credit score. They won’t, however, turn you down or hike up your rate automatically. After taking all of your income into consideration, the credit union may also expect you save within their institution prior to taking out a loan. Credit unions don’t have any hidden fees or costs, and they also won’t penalize you for paying the loan back early. In addition to those great perks, many credit unions also offer free life insurance for their customers, so in the event of your death, your loan will be paid off. Getting a loan from a credit union doesn’t mean it has to be huge amounts of money either. Actually, most credit unions will allow small loans for up to a year.

There seem to be credit unions popping up all over the United States, and many people are taking closer looks at them. There’s no wonder why either. With the borrowing regulations and payouts on savings accounts that credit unions offer, they are becoming much more popular than the regular run-of-the-mill bank.

Many people are switching their funds over to credit unions. If you are interested in opening a credit union account, check at a location near you and see if they can service your banking needs.

Simple Savings Plan: What Grandma Taught Me About Saving

January 6, 2016 By Amanda Blankenship 1 Comment

Saving can be hard and oftentimes complicated, but it doesn’t have to be. Everyone has a moment where they know they need to start taking a closer look at their budget and start saving more, however, it can be daunting. It doesn’t need to be though. Actually, saving can be as simple as placing money in an envelope.

There seem to be so many different savings plans and challenges circulating on the Internet. Each of them have their own benefits and their own downfalls. What may be good for you may not be good for the next person and so on, so it is important to research and discover what works for you when it comes to saving.

Growing up, my grandmother always told me about a savings plan she had that I thought was crazy, but it really works, and it is simple. She would get an allowance from my grandfather and she would bargain shop for groceries so that she could save for certain things. Each week, she would put a quarter per child (they had three kids) away into an envelope. This money would be for things like Christmas presents, Easter outfits, birthdays, school costs (field trips, etc) and other things that kids would need that would require saving. That would cut her weekly spending by 75 cents, but it meant she would be able to save for things that were important to her.

Of course, that exact scenario will not be the same in today’s world. Most families are two-income families, and if they are not, they are usually doing their banking online and not pulling cash out for envelopes. So, what is a simple savings plan that people can use today?

Similar to grandma’s plan, but not exactly the same is to put away a dollar every time you spend money. So, that means every time you swipe your debit card, a dollar would go into savings. Although it is just a dollar now, it will quickly begin to stack up.

Another way to implement a similar plan would be to pay yourself first when you get a paycheck. When you get paid, you set a specific amount to go into savings for yourself and that amount always goes into savings.

When searching for the right savings plan, there seems to be a lot of options. Every plan differs, and not every single plan is helpful to everyone. When choosing a savings plan, make sure you have keep these things in mind when setting up a plan:

First, decide on how much you want to save. Calculate the initial amount you will set aside and then the recurring amounts you’ll be setting aside. Work this into your budget. You can use a savings calculator to discover how long it will take to save specific amounts of money.

Decide why you are saving. If you are saving for a house, a new car, college, retirement or just ramping up an emergency savings plan, it is important to have a direction for your savings.

Whether it is a 52 week savings challenge, a week-by-week, paycheck-by-paycheck or even a quarter-by-quarter savings plan, saving is important. Make sure you have some type of plan and put your finances first.

52 Week Savings Challenge Alternative

December 30, 2015 By Amanda Blankenship Leave a Comment

As 2016 grows closer, many people will be making resolutions to better themselves in the new year. People will be making resolutions to eat better, lose weight and some people will resolve to save some money in the new year. The 52 week savings challenge has taken the Internet by storm in recent years, especially around the new year, and it is possibly a great way to save, but maybe not for everyone.

The 52-week savings challenge has been gaining popularity each year as a New Year’s resolution or even just a good way to save some extra cash. For those who haven’t tried it yet, the concept is pretty simple. The standard version has you putting aside the number of dollars which correspond to the week number of the year. For example, in week one you put aside $1. During week two, you put aside $2. During week ten you put aside $10 and during the last week of the year you put aside $52. If you do this the entire year, you will have saved $1,378.

There have been a few variations on the savings plan, and it seemingly has a variation that practically anyone can follow. It even has some changes made to teach kids about saving throughout the year.

One of the variations is the “Save By Number” 52 Week Savings Challenge. Instead of giving you a different amount of money to save each week, the “Save By Number” variation gives you a weekly amount to save and it changes each month. For example, during the month of January, you will save $12 each week. As the year goes on, the dollar amount each month will decrease by $1, like this:

(Photo: www.4hatsandfrugal.com)

This plan gives you a bit less money saved at the end of the year. However, it can be great for teenagers who just got their first job to save a few hundred dollars throughout the year. It can also be great if you are new to following a savings plan or don’t have a huge savings goal set for the year. It can also be great for “additional” savings, savings added to money that you already budget for savings each month.

There are a lot of other great ways to save money, too. For instance, you could use a money saving app like digit.co to automate your savings for you. Remember to include some kind of savings plan into your daily, weekly and monthly budget. Also, if you are on a strict savings plan, save any “extra” money you come into. For example, if you get a bonus at work, this money would go directly into savings, or even a gift (cash).

Savings is never easy, but some of the savings plans and different tools can make it easier for you. The best advice when it comes to saving and if you are thinking about taking part in this challenge is just to do it. Once you’ve started the process and have gotten in the mindset of saving, it will be much easier to just save your money in the long term.

What Are Alternatives to Money Market Accounts?

December 14, 2015 By Amanda Blankenship Leave a Comment

People with money market accounts (MMA) have probably realized the time has come for them to find an alternative for saving (or investing) money. MMAs have offered investors a low-risk account to have same-as-cash investments. These types of accounts have been considered a go-to for decades. However, the time for an MMA may have come and gone.

Interest rates on MMAs have been just barely above zero for years Many people leave their money in the account as a type of savings alternative. However, this approach could hurt you in the long run. Money market accounts have lost their value, but have no fear. There are still plenty of alternatives for the MMA.

Savings Accounts

Instead of opening an MMA, just open a savings account. This seems like an “old” idea. Of course, savings accounts aren’t as exciting as investing your money, but a savings accounts may have a higher interest rate, especially if you don’t touch the money for a period of time. Savings accounts are likely much more accessible as well. Many banks have savings accounts available to their customers. Check to see if your bank offers one.

If you’d like to open a separate savings account with another institution, there are many high-yield savings accounts throughout many different banks. Savings accounts, unlike MMAs, are also FDIC-insured.

Bank Money Market Accounts

Bank MMAs and money market mutual funds may look the same on the outside, but there is one key ingredient that makes them fundamentally different. The traditional MMA and a bank MMA may have similar interest rates. They may even own the same types of assets. However, a bank MMA will likely be FDIC-insured up to $250,000. Obviously, only invest money within a strong financial institution, but when choosing between a mutual fund and a bank MMA, choose the bank’s option. It will provide you piece-of-mind with your investment.

Short-Term Bond Funds

If you don’t need daily access to the money you’d like to place in an MMA, but may need access to it a couple times a month (at most), then a short-term bond fund may be the perfect alternative to an MMA for you. The only thing to look out for with short-term bond fund is the potential fees you may acquire if you take from the fund too often. Sometimes if the funds are held for any less than 120 days, you can meet a 1 to 2 percent fee.

Fixed Income Focused ETFs

Exchange Traded Funds (ETFs) can be the perfect alternative for any MMA. Although these often hold a little bit of a higher risk, ETFs can create a much higher yield than an MMA. You can open a Short Term Maturity ETF and gain access to your money whenever you would like. There are some ETFs that can be traded through apps or online trading companies where the company practically does the work for you (you just put the money in). There are also some more hands-on opportunities.

If you have an MMA and have been looking to take your money and put it elsewhere, there are plenty of alternatives. With interest rates for MMAs so low, changing the way you invest your money may be a smart move.

Four ways to make Saving Easier

November 14, 2015 By Amanda Blankenship 1 Comment

Saving can be such a chore. Chances are, you are making it a lot harder on yourself than it needs to be. There are a few steps, tip and tricks that you can use to making saving money, whether it be taking advantage of available apps or simply talking to an advisor, there are probably a few things your not doing to make saving easier.

Track your monthly spending

Many checking and savings accounts have applications you can use for their services. The apps give you a “snapshot” of your monthly spending, what weeks you spend more, whether you’re spending most of your money on entertainment, food, bills. When you track your monthly spending, you can identify places where you can slim down (like eating out) and place the extra money into savings.

Flexible spending

A flexible spending account may be a possible way to save as well. Flexible spending accounts (FSA) take advantage of money you set aside from your paychecks. With each pay period, a set amount of money comes out of your check (tax free). You can use a FSA for medications, co-pays, and you can even use the account for commuting costs to and from work. The best part about an FSA is that you are paying with pretax dollars rather than after-tax dollars and essentially getting a discount on things that you normally buy anyway.

Begin contributing to retirement

Saving is always better when you are saving for something specific, and what better thing to save for than your own retirement? Workplace retirement plans, such as 401(k), allow your retirement investment to grow without being taxed. You can set up a specific amount of money to come out of your check every week and it goes directly into the 401(k), untaxed. Some companies will even match a percentage of your 401(k) contribution.

If your company does not offer 401(k), you may want to check into an individual retirement account. If you have earned income, then you can contribute to an IRA (up to $5,500 a year if you are under the age of 50). You can choose different types of IRA accounts to invest in as well: commodities, individual stocks, certificate of deposit. You can even put money into each one of these to diversify your retirement portfolio.

Start your emergency savings account

Emergency savings is a must-have. Most people save for specific events, items or life-events (like weddings or retirement). However, people often forget that they may need to save for emergencies. Whether it be car trouble that needs to be repaired on the fly or a leak in the plumbing at your house, you should have a reserve fund available. Many bank accounts offer separate savings accounts (one for emergencies and one for regular savings). Have a reserve for things you don’t plan on happening is always a great way to save money.

Using apps, different types of savings accounts and keeping track of your spending are all amazing ways to save your money and cut down on spending. Whether you’re saving for retirement, expected or unexpected expenses, saving should always be on your mind, and there are ways you can be making it easier for yourself.

Millennials are Saving at a Younger age than any Other Generation

November 12, 2015 By Amanda Blankenship 1 Comment

New research has shown that millennials are putting their first dollar towards retirement almost a decade before “boomers.” Boomers, who spurred the mutual fund industry, are no competition for the millennial generation when it comes to saving.

An average millennial household starts investing its funds at the age of 23. At the older end of the boomers generation, they started investing at the age of 37 and the younger end at 32. The average Generation X household started investing at the age of 26, so it seems that with each generation, people are thinking more about saving and their retirement than those before them. While this tells a story, there is more here than a simple generation gap.

There is some history as to why boomers may have waited so long to invest in mutual funds. Although mutual funds were started in the late 1920s, they did not gain popularity until the 1980s, when many boomers had already entered the work force. They felt pressure to save, but they weren’t thinking about their money growth in the long run. Many of them saw individual stocks as their only option.

In 1978, the Revenue Act was passed and had a section detailing the 401(k), that is what changed how people saw investing in mutual funds and saving. 401(k) savings and retirement planning became a gateway to mutual funds.

Now mutual funds assets sit at a pretty $16 trillion today, but prior to 401(k), the numbers were at $50 billion in the late 1970. There are nearly 8,000 mutual funds you can invest in today, compared with fewer than 500 in the 1970s. That is a huge change, and it could be why so many people are investing at younger and younger ages.

Millennials only make up 16 percent of the mutual funds market while boomers and Generation X make up 40 and 32 percent, respectively. However, the generation is still extremely young, and there is much to be said about the saving habits of the young generation. Many millennials are doing a rather impressive job when it comes to saving their money.

Eight in 10 of the millennial generation said that the recession taught them that they had to save, much like the generation that grew up during the Depression. Many of them are taking full advantage of 401(k) plans at an early age, and that gives them about a decade of additional growth compared to boomers who didn’t start saving towards retirement until they were in their 30s.

Another probable reason for millennials being able to save so easily is that everything is automated. Many millennials don’t even have to think about putting their money away, they simply set up an automatic with drawl or transfer to savings or a bond account.

While millennials have technology and an early start on their sides, boomers are aren’t doing so shabby themselves. Many of them have plenty of retirement money put away and, in fact, the generation even takes advantage of some of the technology available to them to automate savings.