Money & Finance
SAVINGS AND GROWTH COMPONENTS OF YOUR FINANCIAL LIFE by Marc Schliefer
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JOHN ERIC HOME
In our last issue, we discussed cleaning up your junk drawer and looked at the protection component that included Automobile insurance, Home insurance, Liability insurance, Disability insurance, Medical insurance, Government Plans, Wills and Documents, Trusts and Ownership, and Life insurance. This time we will discuss cleaning up the savings component of your junk drawer and look at strategies that you can use to help you make the best use of your savings components. The 9 components of the savings drawers are Regular Savings, Credit Unions, Checking Accounts, Savings Bonds, Certificates of Deposit, Money Markets, Tax Deferred, Tax Free, and Tax Deductible drawers. We will look at Regular savings first. The current interest rate environment is in a very low place, but rates may move up in the next year or so. On savings accounts, rates will probably move very slowly, if at all. This is where you would invest your liquid cash that you may need in an emergency and where there is no chance to lose any principal. Most savings accounts are insured by the Federal Deposit Insurance Corporation for $250,000. If you have multiple account owners or beneficiaries, you can get additional insurance protection. Unless you have more than $250,000, you usually want to have only one savings account. I have had clients that have a lot of small savings accounts that are scattered among several banks and they lose track of them. Also, if there is no activity on certain accounts for several years, banks are required to turn the accounts over to the state and, each state has different rules regarding that amount of time. The next place is Credit Unions; they can be a great place to have debt consolidation loans and access to unique debt strategies. Sometimes they offer higher interest rates on savings accounts. Like regular savings, you don’t want to have too many accounts; it becomes difficult to keep track of numerous accounts. Checking Accounts is the next item. You want to have one account for you, one for your significant other, a joint one and one for each entity that you have. The entities would be a trust or business account. We see people that have too many accounts and their funds are too dispersed and they often wind up transferring funds from one account to another. One of the benefits of consolidating your financial life and getting rid of junk drawer planning is to simplify your life and, in the long run make it easier for heirs and powers of attorney to keep track of and consolidate your finances. Savings Bonds are good if you have older savings bonds. EE savings bonds pay interest for 30 years and then they stop. You should look at www.treasurydirect.gov to see the value of your current savings bonds and track them. It is a great place to see what interest rate your savings bonds are earning and also to see when the payments conclude. Savings bonds have deferred taxes on the