Start Saving and Let That Money Build Itself

So we all want to save more money right?   What can we do to increase our savings?

Many of us were told by our elders that if you want to save money the best place to put it is in a savings account at the bank (remember that old question of whether it’s better to put it under your mattress or in a savings account?).

This was good advice back in the day but the problem with it now is the average bank savings account barely gives you any interest on your money.  Truth is, for most people you are probably losing money since your interest rate is lower than the rate of inflation.

Yup, all that conventional wisdom about putting your money in a savings account is losing you money.

So what do you do?

A savings account is still a good idea but you need to find one that actually gives you a decent interest rate.  A good place for that is an online bank savings account like Capital One 360 Savings.

I’ve been using them for about four years or so and it has been great (there are other online banks out there but 360 Savings has been pretty good to me so far).  They have no minimum and no account fees.  Many other banks offer higher rates but you have to start with a good amount of money (doesn’t it seem likes it’s easy to make money when you have money?).

Go over there and start saving.

Here are some tips to start saving up money that will build itself:

1. If you don’t have to put a lot in, start with something small like $20.  Now you aren’t going to get rich with this but you will see your money growing.

2. Set up an automatic deposit for $5 a week.  We can all scrape together $5, can’t we (you can even start smaller if you need to)?  After a few weeks you’ll see your account growing.

3. As you feel more comfortable try to up the dollar amount, maybe $7 or $10?

4. Once you’ve saved for a bit ask yourself if you can afford to put away some money that you will absolutely not touch for six months.  It doesn’t have to be a lot just something you won’t be needing.

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Really, don’t touch the money!  You don’t want to use this money.

Now take this amount and open up a 6-month CD, or Certificate of Deposit (Capital One also has no minimums for their CD’s).  This will give you a slighter better interest rate than your savings account.  Remember though, you shouldn’t need this money for at least six months (12 months CD’s are even better but that’s up to you).

When your CD matures (the six months are up) see if you can open up a new CD maybe with more money.

If you have specific goals to save for you can set up different accounts within your account and fund them differently.  For example, if you need to save up for the holidays set up a holiday account and put a few of your dollars in their every week/month, etc…

You should be seeing your account growing now both due to the money you’ve put in as well as the interest you’ve earned.  It’s actually kinda fun to look at my account and see how much interest I’ve earned this month.

I didn’t mention it but you will need to have a checking account already.  This will be where you transfer your money from into your 360 Savings account (and vice versa).

This in itself isn’t going to get you rich but it can help you to start saving more effectively.  The hardest part is putting those first dollars in there and keeping up the discipline.

The journey of a thousand miles starts with the first step.  The same idea holds true with savings and wealth – it all starts with that first dollar!

Let me know what you think and if this works for you!

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Published or updated March 24, 2013.

Comments

  1. Harry Campbell says:

    Before you invest in a certificate of deposit from J. P. Morgan Chase Bank be sure you understand their early withdrawal penalty. Once you understand the penalty, compare it with other financial institutions in your area before your invest.

    • It’s not always the rate. If you think you might need the money you definitely need to know what the early-withdrawal penalties will be.

  2. ING is a great bank. I’ve banked with them for the past 2 years now, and have absolutely no complaints. I love that I can open multiple accounts, and use each for a different purpose. Plus the fact that purchases show immediately in the log is another great bonus.

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