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Savings and Savings Accounts 101
Posted By Ron On April 27, 2010 @ 6:55 AM In Budgets,Personal Finance,Saving Money | Comments Disabled
No matter what your financial status in life, virtually everyone needs to have a savings account . But first, do you have a plan for those savings? A prescription before a diagnosis results in malpractice, so first decide WHY you’re saving, what your goals may be, and how much you can afford to save (get that budget  in force!).
Generally, the money you put into your savings account  should be for a short term goal (less than 5-10 years) or for an emergency fund. Money you’re saving for things that stretch out longer than 5-10 years should ideally be invested  (an entirely different topic ).
What are some possible short-term savings goals?
A savings plan  is breakdown of how much of your budget  surplus you need to put into savings each month to achieve your savings goals. If your budget  leaves you with a $300monthly surplus and a $3,000 engagement ring is your sole savings goal, you should plan to put $300 in your savings each month for 10 months. If you’re saving for several different goals at once, your plan should subdivide your monthly surplus based on the amount and urgency of each savings goal.
The easiest place to keep money that you intend to save is in a savings account. They all work roughly the same way: you deposit money, it earns interest, and you withdraw it when you need it. These accounts are virtually risk-free since they’re insured (currently up to $250,000) by the Federal Deposit Insurance Corporation (FDIC ), one of the U.S. government agencies established to protect savers from bank failure.
Though all savings accounts serve the same basic function, they differ in terms of yield, fees, and withdrawal policies.
You can set up a savings account  at an online bank, a traditional bank, or, a credit union.
Some people feel more comfortable using a traditional bank or a credit union, since they can visit the bank in person with detailed questions or would like to set up another account, such as a checking account. Me? I prefer using an online bank (I use ING Direct ) and they are a great choice if you just need a basic account to park your savings in an account with a comparably high yield. Online banks  are also a great choice if you live in a rural area or in a location without retail bank branches.
Setting up an account at any of these financial institutions typically involves filling out a few basic forms with your personal information, including your Social Security number, and making an initial deposit to establish the account, which often can be as little as $25. And remember, all U.S. based savings accounts are FDIC insured up to $250,000.
The best way to force yourself to stick to your savings plan is to use an automatic deposit plan. These plans automate the process of depositing money into your account each month. To set up a plan:
Most likely you’ll adjust quickly to having a lower amount of take-home pay and won’t miss the money that goes straight into your savings account. If you find that you don’t adjust, you can always cancel your automatic deposit plan. If you’d prefer to have a bit more flexibility with the money that you deposit automatically, you can choose to direct the money into a checking account , which typically has no limits on monthly withdrawals.
Photo from Snopes.com . This was part of $207 million seized in a drug raid. It wasn’t kept in an official savings account …
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 budget: http://www.thewisdomjournal.com/Blog/go/budget.php/
 Image: http://www.snopes.com/photos/crime/drugmoney.asp#photo
 savings account: http://www.thewisdomjournal.com/Blog http://www.thewisdomjournal.com/Blog/go/savingsaccount.php/
 invested: http://www.thewisdomjournal.com/Blog/discount-brokerage-firm-choices/
 different topic: http://www.thewisdomjournal.com/Blog/saving-vs-investing/
 engagement ring: http://www.thewisdomjournal.com/Blog/how-to-buy-a-better-diamond-for-less/
 clothing: http://www.thewisdomjournal.com/Blog/ways-to-cut-your-clothing-costs/
 gifts: http://www.thewisdomjournal.com/Blog/go/gifts.php/
 savings plan: http://www.thewisdomjournal.com/Blog/17-sneaky-savings-strategies/
 FDIC: http://www.fdic.gov/
 Yield is expressed as an annual percentage: http://www.thewisdomjournal.com/Blog/it-pays-to-know-the-difference-between-apr-and-apy/
 Online banks: http://www.thewisdomjournal.com/Blog/online-banks/
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