Make Better use of Your Money at Your Bank
It’s just not enough to work hard for your money. In order to grow more wealthy than you are now, you must start making your money work harder at your bank.
Start from where you are now and eliminate any kind of service charges. Read over your bank statement to see how much you are being charged, and for what specific services. Talk to other banks and compare what they charge for the same services.
You may find your bank may offer you a better deal. For example, you opened your checking account with $500 flat fee service charge of $5 per month. Now, its a few years later and your balance may have risen so that you now qualify for free checking or debit cards. Your bank will NOT automatically change your plan as long as it can keep collecting your $5 over, and over. One phone call or a visit to your bank could save you $60 a year.
Never let your money accumulate in a noninterest bearing account, such as some checking accounts. Instead, ask your bank for a checking account that pays interest as long as you maintain a minimum balance.
Set up a money market account, in addition to a checking account. These out pay regular savings accounts with an interest rate tied to movement with the prime rate. You can then write a monthly check to your regular checking account to pay for bills.
Once you have chosen the highest interest account, make regular deposits into it. Put your paycheck and any other receipts into this account. Transfer to the lower paying checking account only the amount needed to cover regular expenses. A realistic goal is to hold on for savings to at least 10 percent of all the money deposited to your money market account.
Consistent deposits are the key. For example, let’s say it’s January 1 and you’ve made a decision to start investing next year at this time. You have set your mind to save $1,000 (plus interest) especially for that purpose. If you’re not used to parting with $1,000 in cash all at once, you may have difficulty meeting your regular expenses.
You can reach your goal by December if you put $85 per month ($85 x 12 = $1,020) into the highest interest money market account, compounded monthly. But, you then start thinking about giving up $85 each month. So, you don’t deposit the $85 for the entire 12 months. In December, you get more at ease and put $1,000 into your money market account. Sounds great right?
You have the investment money you promised yourself and you haven’t lost a penny, or have you? December is the twelfth month of your savings year. Due to the way interest is truly computed for example, your $1,000 will earn one month’s worth or 5.5 percent, or $4.58 (1/12 x .055 x $1,000).
Compare this with regular $85 deposits, January through December, earning 5.5 percent in that same money market account. If you desposit $85 per month, you get a total of about $26 in interest. This may not seem like a lot of money, but look at what $26 really is: almost one third of one month’s $85 deposit. Money that you don’t have to earn for your money market account.
Look for other investment alternatives in the accounts department. Checking accounts are fully liquid, however, they are designed to hold only small amounts of money. If you have the minimum required, and you can get along with less liquidity, put a larger sum of money into a six month or one year CD or short term government securities – term accounts. These overlooked vehicles pay rates higher than regular savings or checking accounts and offer almost immediate liquidity.
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