Tuesday, April 19, 2011

Savings Options for Short Term Goals

In today’s market there are many options to save money. Due to the recession Americans have learned the hard way that they have to save no matter what their financial situation. There are tons or products available to save money. Here are some benefits of using basic products to achieve short goals.

Checking Accounts
• Can be used to create achieve financial goals if the account earns interest such as online checking accounts with ING, Emigrant Direct or HSBC
• Can transfer money between accounts with no fees and provide you quick access to your money when needed
• Can be used to achieve short-term goals such as paying down debt, saving for a vacation or doing home repairs
• Can be used to create an emergency fund with 9-12 months of monthly expenses
• Online checking accounts helps you plan in advance since most take 2-5 business days to transfer money from accounts

Savings Accounts
• Have lower interest rates which can vary
• Can be used for short-term goals or to cover unexpected expenses such as car repairs, home maintenance, etc.
• Earn higher interest than regular checking accounts but earn less interest than bonds and CD’s
• Online savings accounts such as ING Direct of HBSC have higher interest rates
• Online savings accounts helps you plan in advance since most take 2-5 business days to transfer money from accounts

Money Market Account
• Can be used as to setup an emergency fund or for short or long term goals such as saving for a down-payment for a home, purchasing a car or starting a business
• Have restrictions on how often you can access the money
• May earn higher interest rates than traditional savings accounts
• Require much higher minimum balances to avoid maintenance fees usually $2,500 and up
• Can write checks
• Interest earned by investing in the stock market so you can lose money

• Should be kept for one year or less
• Can be used to start a savings account if you don’t need to access the money for a while
• Can transfer the money later to another savings product to earn more money
• Should only be used for short-term financial goals
• Don’t lose money
• Interest rates are fixed and are higher than traditional savings accounts
• Have to keep the money until the CD matures otherwise you will pay a penalty
• Terms can range from 3 months to 5 years

Traditional Bonds
• Provide tax advantages
• Can be used for long term goals to pay for a college education
• Not the best product for saving money
• Should be used in addition to other savings products
• Interest earned may be free from federal taxes if income limits are not exceeded when the bond is cashed
• Provides a lower interest rate than other savings products
• Interest earned is exempt from state and local taxes
• Money cannot be accessed until bond matures
• Interest rates vary based on the market rate

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