Using Your Health Savings Account to Build Retirement Savings
Health Savings Accounts are an excellent way to build a second retirement account. These tax-favored accounts, which have only been available since January of 2004, can be opened by anyone with a qualifying high-deductible health insurance plan. Once you open an HSA account, you can place tax-deductible contributions into it, which grow tax-deferred like an IRA. You may withdraw money tax-free to pay for medical expenses at any time.
The biggest reason more people don’t retire before age 65 is lack of health insurance, and many Americans reach age 65 woefully unprepared for the medical expenses they’ll face once they do retire. One of the most important long-term reasons for establishing an HSA is to build up some money for medical expenses incurred during retirement.
Fidelity Investments reports that the average couple retiring in 2006 will need $190,000 to cover medical expenses during retirement. This assumes life expectancies of 15 years for the husband and 20 years for the wife.
HSAs are, without exception, the best way to build up money to pay for medical expenses during retirement. You should not contribute any money to your traditional IRA, 401 (k), or any other savings account until you have maximized your contribution to your HSA. This is because only health savings accounts allow you to make withdrawals tax-free to pay for medical expenses. You can take these distributions anytime before or after age 65.
Your HSA contributions won’t affect your IRA limits — $3,000 per year or $3,600 for those over 55. It’s just another tax-deferred way to save for retirement, with the added advantage being that you can withdraw funds tax-free if they are used to pay for medical expenses.
For early retirees who are healthy, a health savings account can also be a smart option to help lower their health insurance costs while they wait for their Medicare coverage. The older someone is, the more they can save with an HSA plan. For many people in their 50’s and 60’s who are not yet eligible for Medicare, HSAs are by far the most affordable option.
Any money you deposit in your health savings account is 100% tax-deductible, and the money in the account grows tax-deferred like an IRA. For 2006, the maximum contribution for a single person is the lesser amount of your deductible or $2,700. In other words, if your deductible is $3,000, you can contribute a maximum of $2,700; if your deductible is $2,000, then that is the maximum. For families, maximum is the lesser of $5,450 or the deductible.
If you’re 55 and older, you can put in an extra $700 catch-up contribution in 2006, $800 in 2007, $900 in 2008, and an additional $1,000 from 2009 onward. The contribution limit is indexed to the Consumer Price Index (CPI), so it will increase at the rate of inflation each year.
How much you accumulate in your HSA will depend on how much you contribute each year, the number of years you contribute, the investment return you get, and how long you go before withdrawing money from the account. If you regularly fund your HSA, and are fortunate enough to be healthy and not use a lot of medical care, a substantial amount of wealth can build up in your account.
Health savings accounts are self-directed, meaning that you have almost total control over where you invest your funds. There are numerous banks that can act as your HSA administrator. Some offer only savings accounts, while others offer mutual funds or access to a full-service brokerage where you may place your money in stocks, bonds, mutual funds, or any number of investment vehicles.
One of the biggest advantages of retirement accounts like HSAs are that the funds are allowed to grow without being taxed each year. This can dramatically increase your return. For example, if you are in the 33% tax bracket, you would need a 15% return on a taxable investment to match a tax-deferred yield of only 10%.
As another example, if you are in a 33% tax bracket and were to invest $5,450 each year in a taxable investment that yielded a 15% return, you would have $312,149 after 20 years. If you put that same money in a tax-deferred investment vehicle like an HSA, you would have $558,317 – over $240,000 more.
Because catch-up contributions are allowed only for people age 55 and older, if one or both of you are under age 55 you should establish your HSA in the older spouse’s name. This will allow you to capitalize on the expanded HSA contribution limits for people in this age range and maximize your HSA contributions. Once that person turns 65 and is no longer eligible to contribute to their HSA, you can open another health savings account in the younger spouse’s name.
Strategies to Maximize your HSA Account Growth
If your objective is to maximize the growth of your HSA in order to build up additional funds for your retirement, there are three important strategies you should implement.
Strategy #1: place your money in mutual funds or other investments that have growth potential. Though this is riskier than placing your money in an FDIC-insured savings account, it is the only way to really take advantage of the tax-deferred growth opportunity that an HSA provides.
Strategy #2: delay withdrawals from your account as long as possible. Though you may withdraw money from your HSA tax-free at any time to pay for qualified medical expenses, you do have the option of leaving the money in the HSA so that it continues to grow tax-free. As long as you save your receipts, you can make medical withdrawals from your account tax-free at any future date to reimburse yourself for medical expenses incurred today.
As an example, let’s say a 45 year old couple places $5,450 per year in their HSA over a period of 20 years, they have $2,000 per year in qualified medical expenses, and they get a 12% return on their investments. If they withdraw the $2,000 from their HSA each year, they’ll have a net contribution of $3,450 per year into their account, and they’ll have $248,581 in their account when they begin their retirement years.
If on the other hand they delay withdrawing that money, they will have $392,686 in their account at age 65. If they choose they can withdraw the $40,000 to reimburse themselves tax-free for the medical expenses incurred during that 20 year period, and still have $352,686 in their account – over $100,000 more than if they had withdrawn the money each year.
Strategy #3: make the maximum allowable deposit to your HSA at the beginning of each year. Even though you are allowed until April 15 of the following year to make deposits to your HSA, you should take advantage of the tax-free growth in your account by funding it as soon as possible. The extra interest you can earn by contributing to your account on January 1 of each year rather than the next April 15 can amount to over $40,000 in a 20 year period, and over $100,000 in 30 years.
Using Your HSA to Pay for Medical Expenses during Retirement
When you enroll in Medicare, you can use your account to pay Medicare premiums, deductibles, copays, and coinsurance under any part of Medicare. If you have retiree health benefits through your former employer, you can also use your account to pay for your share of retiree medical insurance premiums. The one expense you cannot use your account for is to purchase a Medicare supplemental insurance or “Medigap” policy.
Though Medicare will pay for the majority of health expenses during retirement, there many be expenses that Medicare will not cover. Nursing home expenses, un-conventional treatments for terminal illnesses, and proactive health screenings are all examples of medical expenses that will not be paid for by Medicare, but that you can pay for from your HSA.
Long-term care is assistance with the activities of daily living, such as dressing, bathing, or feeding yourself. It can be provided in your home, a retirement community, or a nursing home. Long-term care expenses can be paid for using funds from your HSA, and long-term care insurance can even be paid for from the HSA up to the following maximum annual amounts:
- Age 40 or under: $260
- Age 41 to 50: $490
- Age 51 to 60: $980
- Age 61 to 70: $2,600
- Age 71 or over: $3,250
To establish a health savings account, you must first own an HSA-qualified high deductible health insurance plan. Compare HSA plans side by side to determine the best value to meet your needs. Once you have your high deductible health insurance plan in place, you can open your Health Savings Account with the financial institution of your choice.
Tags: Added Advantage, Deductible Contributions, Deductible Health Insurance, Fidelity Investments, Health Insurance, Health Insurance Costs, Health Insurance Plan, Health Savings Account, Health Savings Accounts, High Deductible Health, High Deductible Health Insurance, High Deductible Health Insurance Plan, Life Expectancies, Medical Expenses, Medicare Coverage, Money Tax, Peo, Retirement Account, Retirement Savings, Traditional IraRelated posts
10 Tips To Help You Find A Superior Financial Consultant
10 Tips To Help You Find A Superior Financial Consultant
Even though the best financial consultant you could ever hire stares back at you every day when you look in a mirror, for those of you absolutely unwilling to learn how to do-it-yourself, here are ten tips to help you find that one financial consultant out of every 1000 that actually is fairly impressive.
To help me formulate this list, I considered some of the absolutely useless investment strategies I had learned at the worlds leading investment firms as well as the ridiculous focus of some boutique firms I had spoken to when formulating the long tail investment strategies that constitute the curriculum of my SmartKnowledgeU campus.
About five years ago, as I was just starting to develop and test my investment strategies that I now use today, I interviewed with a smaller, boutique investment firm in the Bay area of San Francisco that has a stellar reputation in the mass media as being on the cutting edge of revolutionary investment strategies. I thought to myself, if anything can reveal how far the top investment firms have evolved in their strategies to incorporate a changing information landscape to identify better investment opportunities, it will be my interview with this firm. Needless to say, I was stunned by the fact that this firm’s strategies basically mirrored the same, old, strategies of every investment firm on Wall Street.
A top manager at this firm proceeded to ask me five key questions (key to him at least) that he strongly believed was important to making intelligent investment decisions. However, I felt that his questions were either irrelevant or too unfocused to be of any worth. I was astounded that this firm had managed to gather billions of assets from private individuals. After witnessing the incompetence of this top manager at a top investment firm in the United States, I was merely convinced that hundreds of thousands of people have been duped and bamboozled by very strong salesmen that are able to effect the appearance of investment experts but in reality, know close to nothing.
The only problem with this scenario is that since most people do not know the right questions to ask, they never learn that their trusted advisors know next to nothing. If investors dont know the right questions to ask, investors can ask a hundred questions and still not receive any answers that will help him or her assess the level of that financial advisors competence. Ask better questions, receive better answers, and improve your returns three fold, four fold or even more.
So here are 10 questions to get you started:
(1)What is your strategy to select individual foreign stocks?
Im not a fan of mutual funds. I know all about their hidden expenses besides the overt fees they charge, plus I dont like the fact that a lot of foreign mutual funds take a beating whenever the masses have the slightest fear about a pullback in the markets. I think owning individual stocks is a much better strategy, especially in foreign markets.
(2)What strategies do you personally use to give me a good chance of earning 20% or higher without assuming great risk?
Look, Im going to be honest. 6%, 7% even 10% a year doesnt cut it for me.
(3)Where do you think will be the best performing markets for the next five years? What percent of my portfolio will you devote to these markets?
b>(4)This question is a follow-up question to (3). If the answer to question three was, for example China, Canada and Australia, then ask, How much of my portfolio should be in Chinese, Canadian & Australian stocks and why?
(5)If answer (4) does not make sense in response to answer (3), probe with more questions.
For example, if the answer your financial consultant tells you is 20% tops, then ask, If you tell me hands down that the best markets for the next five years will be in China,India and Australia, why are we only allocating 20% of my portfolio to these markets?
(6)What are the best asset classes to be invested in for the next five years and why?
I dont want the standard diversification strategy applied to my portfolio that you apply to every other client here. I think its a terrible way to build wealth and dont agree with it. Look at all the great individual investors that were able to build wealth by determining what assets were the best and then concentrating their investments in just a few asset classes.
Even if you tell me ,Look at Warren Buffet who was a buy and hold buyer, today we live in different investment times. The horse and buggy was the best way to get around at one time but not anymore. Investing has changed, and what worked in the past is not the best way to invest today.
(7)What effect will the global currency markets have on the best and safest places to invest this year and why?
(8)How are you using technology and the internet to improve portfolio performance for me?
What novel strategies do you use that leverage technology and increased accessibility to top-tier financial, economic, and political information to grant me the best chance of earning stellar returns?
(9)How will you safely invest in developing markets for me?
A lot of the best performing markets are emerging markets that also are prone to huge corrections. And remember I dont like mutual funds and I dont think mutual funds are safe either.
(10)Tell me 3 things that you do that no one else at your firm does in managing my money and why.
To understand what many of the answers of these questions should be, feel free to visit the Free Educational Resources at http://www.smartknowledgeu.com. If you receive intelligent answers to all the above questions, you may have just found yourself a winner.
Tags: Assets, Billions, Boutique Firms, Boutique Investment Firm, Curriculum, Cutting Edge, Financial Consultant, Hundreds Of Thousands, Incompetence, Information Landscape, Intelligent Investment, Investment Decisions, Investment Opportunities, Investment Strategies, Mass Media, Private Individuals, Stares, Stellar Reputation, Top Investment Firms, Wall StreetRelated posts
Your Credit Score And An Unsecured Debt Consolidation Loan
Introduction
A great deal is spoken and written about your credit score in this day and age. In fact, your credit score holds the keys to many different facets of your life, which will be discussed in a bit more detail in a moment. Because of this fact, if youve started to see your credit score drop, it is important for you to consider what options are available to you to better manage and to increase your credit score. To this end, you might want to consider obtaining an unsecured debt consolidation loan.
Understanding You Credit Score
Your credit history is the basis for your credit score. The credit history itself includes such items as what kinds of loans or credit youve had, whether you have had bad debt, your payment history, and the status of any existing loans or lines of credit. This tells a lender or credit card company whether they should extend their credit to you by giving them a good idea of what kind of risk you are. All of this is taken into consideration and from all of this a credit score is computed.
Understanding an Unsecured Debt Consolidation Loan
While there are some very specific and technical definitions for an unsecured debt consolidation loan, a more consumer friendly definition actually will be of best use to you when all is said and done. An unsecured debt consolidation loan is a type of loan from which the proceeds of the loan itself can be used to pay off other debts. In other words, the money you obtain through an unsecured debt consolidation loan is used to consolidate your other outstanding debts. An important and appealing feature of an unsecured debt consolidation loan is found in the fact that you do not need to come up with collateral in order to obtain this type of loan. In other words, you do not have to have a lien placed on your home (or your car) in order to obtain this type of debt consolidation financing.
How You Can Improve Your Credit Score with an Unsecured Debt Consolidation Loan
An unsecured debt consolidation loan actually can work to improve your credit score on two levels. These will be explored for you.
First, an unsecured debt consolidation loan will allow you to obtain some immediate relief from the debts and accounts that you have started to have problems with. If you are like most people seeking an unsecured debt consolidation loan in this day and age, you likely have accounts that are no longer current or that you have not been reliable at paying on each month. These outstanding debts and open accounts have started to effect your credit score in a negative manner. Each and every month, your credit score sinks a little bit lower because of your inability to deal with your open accounts.
An unsecured debt consolidation loan allows you to deal with and resolve the problems that youve been having with your outstanding debts and accounts. This will begin to have a more immediate impact on your credit score.
Second, provided that you abide by the terms and conditions of your unsecured debt consolidation loan, making regularly and timely payments on your unsecured debt consolidation loan will also work to improve your credit score.
Tags: Bad Debt, Collateral, Consolidate Debts, Credit Card Company, Credit Consolidation, Credit Debt, Credit History, Credit Score, Debt Consolidation Loan, Existing Loans, Facets, Money, Outstanding Debts, Payment History, Proceeds, Risk, Technical Definitions, Unsecured Credit, Unsecured Debt Consolidation, Unsecured Debt Consolidation LoanRelated posts
Using A Health Savings Account To Buffer The Coming Medicare
Using A Health Savings Account To Buffer The Coming Medicare Insolvency
The Medicare Trust Fund will soon be out of money, and there will be no practical way for the government to continue to provide the level of benefits that current Medicare recipients receive. The result will be serious rations, waiting periods, and a reduction in benefits. If you wish to maintain your medical freedom, and have access to a high level of medical service, you must be prepared to pay for it yourself. The best strategy is to take good care of your health, and to build up your medical retirement fund as large as possible by using a Health Savings Account.
The Coming Medicare Insolvency
The total federal debt is now over $10 trillion. But if you also include the current unfunded liabilities of social security, Medicare, and other programs, the total federal debt is at least $54 trillion. This number has been confirmed in three separate studies – by the American Enterprise Institute, the National Center for Policy Analysis, and the Brookings Institution.
It is difficult to get a grasp of a number that big. That’s $180,000 per person currently living in the United States. It is four times the U.S. Gross Domestic Product, the measure of the final value of all goods and services produced in this country in the course of a year.
As the program is currently structured it is unsustainable, and the fund is expected to be depleted by 2018. That is a mere 11 years from now. The shortfall in Social Security and Medicare revenues will continue to increase as the years go by – it will exceed $2 trillion by 2030. At that point, half of all tax dollars will have to go to Social Security and Medicare.
That clearly can’t happen. Instead, the system will face massive cuts in benefits, probably in addition to large tax increases.
Who Will Pay Your Medical Expenses During Retirement?
So will Medicare be there for you? It depends on how old you are. Unless you are retiring in the next couple years, I certainly wouldn’t count on it, particularly if you want to insure that you have access to high quality medical care during your retirement years.
Last year Fidelity Investments reported that the average couple retiring in 2006 would need $200,000 just to cover medical expenses during retirement. That estimate did not include the cost of over-the-counter medications, most dental services and, long-term care, if needed. And it did not include the charges that are currently paid by Medicare.
If we cannot depend on Medicare to be there for us, the only smart solution is to save as much money as possible. This will ensure that you can obtain the quality care you need. If you are not currently putting as much money as possible aside to pay for these expenses yourself, you are making a serious mistake.
What Is Your Solution?
As most readers already know, the very best tool for accumulating funds for future medical expenses is a Health Savings Account. An HSA is the only investment that provides a tax deduction when you deposit the money, yet never taxes the money if it is used to pay for qualified medical expenses.
Therefore, you should put as much money as possible into your HSA, and withdraw as little as possible. The contribution limit for 2007 is $2,850 for an individual, and $5,650 for families. Those over 55 can also contribute an $800 catch-up contribution. Making the maximum contribution each year will help you build a medical retirement fund that can be used to pay future medical expenses, tax-free.
Rather than withdrawing money from your account to pay for medical expenses as they occur, you should pay for medical expenses that are not covered by your health insurance, out of your own pocket. Save your receipts (for doctor visits, eye glasses, aspirin, etc), and leave your money in the account to grow tax-deferred. There is no time limit before you have to reimburse yourself, so you can make the most of this tax-free investment.
As soon as possible, you may also want to transfer some of the money into mutual funds. While some HSA administrators are paying interest rates as high as 5%, the only way you are going to really grow the account is to get a much higher return on your money. Many HSA administrators offer a discount brokerage option, so you can place your funds in virtually any stock or mutual fund.
For a family that contributes the maximum contribution each year, it is quite reasonable to assume an HSA account value well over $1 million after 25 or 30 years. Medicare may be broke, but at least you won’t be.
“Medicare HSAs?”
The solution to the pending Medicare meltdown is very complicated, but it is clear that government-run medical programs don’t work. The dismal results can be seen everywhere, from the former Soviet-bloc countries, to the broken down national healthcare systems of Canada and Europe. Medicare must be transformed into a program where seniors have an ownership interest in the money they are spending.
Replacing the government’s obligation to provide benefits with a voucher that seniors could use to purchase health insurance from competing private insurers, and/or deposit into a “Medicare Health Savings Account,” would bring market efficiencies and competition into the picture. This idea is endorsed by both the American Medical Association and the American Hospital Association.
Retirement HSAs may or may not ever come to fruition. But fortunately, HSA plans are available to those under age 65. If you do not yet have an HSA, get signed up for one now. You will lower your health insurance premiums, and can begin putting money aside for medical expenses you will almost inevitably incur during your older years.
Tags: American Enterprise Institute, Brookings Institution, Exceed 2, Federal Debt, Gross Domestic Product, Health Savings, Insolvency, Living In The United States, Massive Cuts, Medical Expenses, Medical Freedom, Medical Retirement, Medical Service, Medicare Recipients, Medicare Trust Fund, Retirement Fund, Social Security And Medicare, Tax Increases, Unfunded Liabilities, Waiting PeriodsRelated posts
Your Credit Score And A Low Interest Debt Consolidation Loan
Your Credit Score And A Low Interest Debt Consolidation Loan
Introduction
If you are wondering whether or not a low interest debt consolidation loan is right for you, you likely have a number of questions. In this regard, you may be wondering how and why your credit score might effect your overall ability to obtain a low interest debt consolidation loan.
Through this article, you are provided with an informational overview of the role your credit score plays when it comes to applying and qualifying for a low interest debt consolidation loan. By considering this information, you will be in a better position to determine whether or not it will be worth your while to make application for a low interest debt consolidation loan at this point in time.
How Your Credit Score Works
You credit score — or FICO score as it is called from time to time — is computed based upon your credit history. In point of fact, the specific manner in which your credit score is determined is a proprietary secret of the Fair Issac and Company, the entity that worked with the three major credit reporting agencies to develop the credit or FICO score system in the first instance.
It is generally appropriate to consider your credit score as being something akin to a grade based on the manner in which youve used credit and dealt with your debt in the past. Of course, this is a simplistic explanation about how your credit score works but, it is also an accurate way of explaining the way the credit or FICO score does work.
How Your Credit Score Will Impact Your Low Interest Debt Consolidation Loan Eligibility
If you credit score dips too low, you no longer will be able to obtain a low interest debt consolidation loan. In fact, your credit score really does need to be in the good to excellent range for you to have the ability to qualify for a low interest debt consolidation loan. In other words, if you are interested in consolidating your debt as part of an overall debt management program or plan, you need to be proactive and actually seek out a low interest debt consolidation loan before your financial situation becomes out of line, negatively impacting your credit score and rendering it unlikely that you will be able to obtain a low interest debt consolidation loan.
Dealing with a Low Credit Score
If you do have a credit score that falls below that point at which you would be more likely to be approved for a low interest debt consolidation loan, you will want to forgo applying for a low interest debt consolidation loan for the time being. You will want to take steps to better your credit score in advance of applying for a low interest debt consolidation loan. Steps that you will want to consider taking include bringing all of your credit accounts current and paying down — at least to some degree — the balances on some of your credit accounts. You will also want to make certain that there is no incorrect information on your credit report that is negatively impacting your credit score.
Tags: Consolidating Your Debt, Credit Debt, Credit History, Credit Reporting Agencies, Credit Score, Debt Consolidation Loan, Dips, Fair Issac, Fico Score, First Instance, Informational Overview, Interest Debt, Loan Eligibility, Major Credit Reporting Agencies, Point In Time, Regard, Role Plays, Score System, Simplistic Explanation, Three Major Credit Reporting AgenciesRelated posts
Working Multiple Jobs To Make Ends Meet? How A Low
Working Multiple Jobs To Make Ends Meet? How A Low Interest Debt Consolidation Loan Can Help
If you are struggling to make debt payments and are working more than one job just to pay the bills, a low interest debt consolidation loan could free up more money for other things. The stress of working multiple jobs and still not having enough money to meet all your needs, is compounded by the stress of constantly facing bankruptcy because of credit card and other debt. This sort of stress is very bad for your health and lowers your quality of life significantly.
After a while of fighting to survive, creatively trying to solve your problems only to face them again the next month and living on the edge, you can begin to feel punch drunk and are less and less able to do what is necessary to simply stay on an even keel. Under these circumstances, debt can worsen and your ability to cope with it can diminish. A low interest debt consolidation loan can reduce your long term debt costs as well as the amount you have to budget monthly for debt repayment.
The biggest problem you will face if you are working multiple jobs is how to find the time to locate the best low interest debt consolidation loan for your needs. There are professionals who can do this for you. If you cant see them in their office you can find an online service to help you. Just make sure you tell them everything of importance so they can find the best product for you.
Once you have combined all your debts into one low interest debt consolidation loan, it is important to cancel all your credit cards so the option of increasing debt doesnt exist. If you pay off the balances and leave the cards open for emergencies, chances are you will fall back on them and your debt will begin to increase again. Dont let that happen. To avoid future problems you will also need to create a budget that works for your family and live within it. Make a commitment to remain debt free.
Living within a strict budget is not as stressful as living beyond your means. Once you adjust your life to your income and enjoy the peace that gives you, you will see opportunities to increase your income that you were blind to before. Stress and worry have a way of blinding us to the good because we are always focused on the problems. A low interest debt consolidation loan will open the door to new financial possibilities and to a much better life.
Tags: Bankruptcy, Circumstances, Credit Card, Credit Cards, Debt Consolidation Loan, Debt Free Living, Debt Payments, Debt Repayment, Debts, Emergencies, Enough Money, Even Keel, Interest Debt, Job Pay, Jobs, Living On The Edge, Punch Drunk, Quality Of Life, Stress, Term DebtRelated posts
The best savings account
The best savings account
Savings accounts are the best idea for putting away a set amount of money each week or month depending on your circumstances. You would be surprised at how quickly this money can add up if you are contributing a set amount from your paycheck every payday.
When shopping around for the best savings account, find one that pays a good interest rate and has a minimal amount for opening the account. A lot of banks only require a dollar to open an account while others may want you to deposit anywhere from 5 dollars to 50.
The convenience of having money automatically withdrawn from your paycheck and placed in your savings account is great for some. However others may not put a set amount in each payday and may want to choose how much they deposit into their savings account.
The best type of savings account will pay a comparable interest rate, be easily accessible to your home or work, will not charge a fee for withdrawals from your account, has on-line availability, and does not require a large deposit to open. If you have a bank account and access it online you should be able to transfer money to and from your savings account. You should try not to transfer from it unless it is an emergency because this defeats the purpose of having the savings account in the first place.
Some types of savings accounts are geared towards the holiday season. This allows you to save money for Christmas. If you start it early enough in the year by the time Christmas rolls around you can have a nice amount for your holiday shopping.
Another type of savings account featured by some banks link your debit card with your savings account. Every time you make a purchase using your debit card the amount is rounded up to the next dollar and the extra is deposited into your savings account. Some of these banks will even match the amount deposited by a certain percentage.
Savings accounts are great ways to start your children out learning how to be responsible when it comes to money. Open a savings account and let them deposit birthday money or Christmas money for themselves. All the change that gets thrown in a jar every day can become a savings account deposit for them. They will love to go to the bank and deposit their own money and in the process you are teaching them the importance of saving.
Another advantage to a savings account is establishing credit. If you borrow money from your bank using the money in your savings to secure the loan, when you pay the loan back you will have established credit with your bank. This can make it easier to get an unsecured loan should you need it.
It is important to have a savings account and add to it regularly. For that unexpected expense that crops up, having the money to cover without having to borrow the money is great. With everything today being based on credit-worthiness, establishing a good relationship with your bank or credit union can make a big difference when it comes to buying a home or a car.
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