Oct 10 2008
A Guide to Frugal Savings - Part 1
Because the feedback I’ve been receiving lately has been so tremendous and due to the questions I’ve been asked privately via email, I’ve decided to write on the topic of savings for the next couple of days. People are scared to leave money in their savings accounts out of a fear that the global economy is going to leave us all broke. I’m writing this in the hope that I can bring some peace of mind to a few of you who are at a loss as to what you should do financially.
Reader Question: Do bother having a savings account these days?
Michael’s Answer: Absolutely! The stock market may be in a tailspin and the government might not know what to do about it, but the FDIC
recently changed the amount that you are insured up to at your banking institution from a maximum of $100,000 for individuals up to $250,000.
In case you’re not familiar, the FDIC is who insures your savings account. Should anything happen whatsoever your money is insured by the Federal Deposit Insurance Corporation. That means you don’t have anything to lose by putting money into your savings account.
Let me make a few notes here:
-
The increase in deposit insurance applies only to banks and savings intitutions who are either FDIC or NCUA insured. Make sure that your institution is a member of one of these or your savings account may be at risk.
-
If your local bank does not offer a high interest savings account, take advantage of an online savings account; they often have a higher rate of return. I have savings accounts at HSBC, for example.
Tomorrow I’m going to go into a bit more detail about how I am saving money and where I have found good savings accounts.
I do believe the 250,000 fdic limit ends in December of 2009. You can read the article here: http://consumerist.com/5059240/what-does-the-bailout-mean-for-you.
Hopefully they will make this a permanent change, they need to do something to encourage people to save more.
I opened a ing account, it pays more interest that a local brick and mortar bank, not a lot but some. What I like about it is you can create sub accounts and name them accordingly, right now I have:
Emergency account
Vehicle replacement fund
Meat fund(buy a 1/2 beef or whole hog)
Taxes
I find it keeps me focused a little more when I can see that each account has a purpose. I never used to plan for anything it would just happen and I would be in panic mode trying to come up with the money to pay for it, even though I know that I have to pay taxes I would never have anything set aside, or I would drain my “savings account” to pay it.
I am considering adding some more accounts such as:
furniture
vacation fund
I always put something in on payday and I do that first, I have made a rule to myself, I have to put something in first. That has been really hard, and some paydays I put more in than others but I always put some in. I guess it is a start, I am interested in hearing other ideas for saving because I would like to be able to have a sizable emergency fund by the middle of next year.
http://downwithdebt.today.com/