WAYS TO SAVE
Put away money beyond the piggy bank
Creators News Service
In uncertain economic times, getting even a half-step ahead can feel like a triumph when you've been racing to just keep up with expenses.
"I like to call it the perfect storm," said Michael Eisenberg, CPA/Personal Financial Specialist for the American Institute of Certified Public Accountants (AICPA). "I don't remember so many negative things happening at one point before. It's like a financial tsunami."
However, the good news is that saving even a small amount each month can literally pay off.
Eisenberg should know. He currently serves on the AICPA's National Financial Literacy Commission and helped to develop the site feedthepig.org to encourage people, especially those in the 24- to 35-year-old age range, to understand the importance of saving. The commission partnered with the Advertising Council to offer savings advice as part of a public service campaign.
Enter Benjamin Bankes, a grown-up piggy bank. "Benjamin has a message to share: Feed the Pig," the site said. "In other words, take small savings steps today to build a solid financial tomorrow."
Hearkening back to the days when kids were taught to drop their change into their piggy banks, the site now translates the habit of savings to larger goals with free weekly e-mail tips.
Eisenberg said the site started when CPAs realized most people had no clue how or even why it was important to save money. For inspiration, they turned to the piggy bank.
"Back then, you probably got a kick out of popping coins into the pig's head," he said. "But we're adults now, and we've got to get a little more creative. Take more control."
Eisenberg said that handling finances has gotten more complicated since childhood. While previous generations just put their money into a bank or bought a CD, choices now are vast. And when people don't know what to do or are burdened by financial decisions, he said, they do nothing.
The Financial Literacy Commission is also determined to teach the value of savings. Their site, 360financialliteracy.org, gives instruction on money management and savings for all stages of life by taking small steps. "If you take on too many things you get overwhelmed, you go back to nothing again," Eisenberg said.
So what should people do? Here are some tips to save on:
* Eisenberg said that young people think they've got all the time in the world, but the reality is that the sooner they start saving, the sooner they will reach their financial goals. At any age, max out an employer's contributions to a 401(k) account and understand that money saved grows, tax-deferred, over the long-term.
* Save monthly, no matter how small the amount, in an interest-bearing savings account. "Don't be motivated by a financial crisis" Eisenberg said. Set savings goals -- whether to build up an emergency account, cover a down payment, or to add to a money-market fund -- and actively meet your goal. Shifting to a money-saving mindset can take a while, but gradually, as funds accrue, its rewards become evident.
* Look at cash flow and create a budget that includes savings. It's easiest to aim to save the same amount per time period. Set a savings goal and estimate how many months it will take to reach it. Once met, work towards your next one. Log daily expenses and follow sites that offer concrete suggestions on how to trim bills, stretch a dollar and make a penny sing, such as 66 Ways to Save Money at consumer-action.org/english/articles/66_ways_to_save_money_en/
* Before opening a savings account, find out whether the account is insured by the federal government (FDIC for banks or NCUA for credit unions). Be aware that financial institutions may offer other products, such as mutual funds and annuities, which are not insured.
*Once you select a type of savings account, compare rates and fees offered by different financial institutions -- including those outside your city. These rates can vary and can significantly affect interest earnings.
* To earn the highest return on savings (annual percentage yield) with little or no risk, consider certificates of deposit (CDs), U.S. Savings Bonds (Series I or EE) or a money-market account. When investing in stocks and bonds, consider using a financial planner or reputable advisor. However, remember that many of them work on commission.
* Consider refunds, rebate checks and bonuses as unexpected gifts that can go straight to savings.
* Pay yourself first. Use direct deposit through an employer to have money whisked into an IRA, 401(k) or money market account. Then you can watch it grow while you never missed it.