Last month, we finished up the Protection component, or the Moat part of financial planning strategies. Now we can move on to the Savings component and start to build your financial castle. The first three components of the Savings component are Regular Savings, Credit Union, and Checking accounts. These types of accounts are for your ready cash and short-term savings. Currently, the interest rates that these type of accounts pay is low. So, most people keep them to pay current bills, build an emergency reserve and deposit their paychecks. The rates on regular Savings Accounts are currently 0 to 1% per year. It is not a place that you will ever make a significant income, but it is a place for you to keep your safe money. There are many local banks that advertise low rates, but you can sometimes talk to the branch manager and get a competitive rate of return. There are some banks that you can locate on the internet with rates around 1%. You need to check the FDIC.gov website to make sure that they are insured and in good standing before you send your hard-earned money to them. FDIC coverage is currently $250,000 per person on the account; there are also additional amounts of protection per beneficiary. The FDIC website has a calculator to figure out how much protection your account will have. Credit Unions are also good places to build up savings. Their rates are also fairly low for savings and checking accounts. You usually need some type of an affiliation to join a credit union, but they are there to provide benefits for their members. Credit unions are usually affiliated with a large company, a government branch, military branches and sometimes counties have them for people that live or work in a certain area. One of the best uses of a credit union is that they are usually a great place to borrow for short-term needs. A short
term need would be a debt consolidation loan or some type of loan to pay off super high credit card rates and lock in a mid-level interest rate for you to pay. We have had credit unions consolidate 12 to 20% loans to a 7-12% loan. Checking Accounts are accounts that you should use as a convenience for you and your family. You want a no-cost or lowcost checking account that will allow you to keep a low balance with no fees for deposits and withdrawals. Many times, the banks or credit unions offer a free type of checking if you keep a minimum balance with the institution. These are the first three savings components; next month we will explore the next three savings components which include Savings Bonds, CD’s and Money Markets.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a registered investment advisor. US Financial Advisors and Equity Planning are separate entities from LPL Financial.
John Eric Home 75