best savings option?

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darkchild24 Posts : 196 Registered: 9/1/06
best savings option?
Posted: Jan 16, 2010 10:22 PM

So, I was sitting here wondering, and as I did a quick Google search, I got to thinking more.

What's the best method in saving money to use towards wedding expenses? Like savings accts. vs. CD's, etc. I'm going to be setting up some kind of savings plan soon, and I'd like to know what the best route to go. Thanks!
 

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auntofthebride Posts : 9,354 Registered: 4/2/06
Re: best savings option?
Posted: Jan 16, 2010 11:15 PM Go to message in response to: darkchild24

Dear DC,

The interest you get on various consumer accounts (CDs, savings accts, etc) is pretty miserable these days. You won't get rich from the interest, believe me. I have a checking account where I earned a whopping eleven cents in interest last month.

I am a financial analyst and work with financial planners. I know something about saving money.

In my opinion, the BEST way to save money, for a young person just starting out, is to have it automatically deducted from your paycheck. That way you never see it. You never get used to it being there. You learn to live on what is left. It's kind of like tax withholding and other deductions.

Next, put it in an account that is "difficult" for you to get to. In other words, maybe set up a savings account at a credit union that is separate from your regular bank accounts. This means to get money out, you would have to go into the credit union and get a check or cash, rather than just pull out a debit card or do an online transfer.

Think about your goal (wedding), the time of the goal (W-Day) and the time you need the money (the months leading up to W-Day for deposits, etc and W-Day itself).

Next, look at how many paychecks you have between now and then. Divide and see how much you need to save out of each paycheck. Set up the automatic transfer and let the savings build "effortlessly".

Once the wedding is over, and the bills are paid, continue the same automatic savings transfer, but this time you have new goals. I suggest you have six-eight months worth of income for emergencies (job layoff, sudden medical issues), then once that is accomplished, save for the big ticket items like a car, a house down payment, children's education, etc. Part of your savings should be directed towards your own retirement account, such as an IRA or a 401(k).

Remember, you can always borrow money to buy a car, a house or finance education. You cannot borrow money for retirement. You have to have build up retirement savings over your working lifetime.

Give some thought, similarly, to charitible donations by automatic payroll transfer. Many companies will take a designated part of your pay and direct it to the United Way or other reputable charities. It is less painful to give money away if you never see it in the first place. Getting in the lifetime habit of charitible donations is good for young people. In order to give intelligently to charity, you have to make informed decisions.

Ideally, the ratio is 10-10-80. Ten percent savings, ten percent to charity then eighty percent to live on. That way you are always living below your means. You have a savings cushion in the event of emergency, and you are involved in helping causes that are close to your heart. I know that might be impossible for many young people who are earning entry level salaries. But, start somewhere, then try to build up to 10-10-80.

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darkchild24 Posts : 196 Registered: 9/1/06
Re: best savings option?
Posted: Jan 18, 2010 8:58 PM Go to message in response to: auntofthebride

thank you AOTB :) after being away from this site for so long, it's wonderful to see and hear your sage advice again. that was definitely what i was looking for and then some! :)
 

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KCI Posts : 150 Registered: 3/30/09
Re: best savings option?
Posted: Jan 18, 2010 10:19 PM Go to message in response to: darkchild24

I actually just opened a separate account and have begun making auto deposits into the account in order to save up for a wedding. I'm not even engaged but I am watching my cousin and her fiance try to plan a wedding on a very limited budget so I thought it was better to start saving now since I can.

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auntofthebride Posts : 9,354 Registered: 4/2/06
Re: best savings option?
Posted: Jan 18, 2010 11:04 PM Go to message in response to: KCI

Dear Kait,

"I actually just opened a separate account and have begun making auto deposits into the account in order to save up for a wedding."

Excellent. Excellent. Excellent.

The advantages of getting the habit of living below your means and making regular, automatic savings and charity deductions are too numerous to mention.

Let's hit the high points:

1. You won't waste your hard earned money on credit card interest rates, overdraft fees and junk like that. Since you have a savings account, just link the savings account to your checking account. If, by accident, you overdraw your checking account, the money can flow in from your savings. (I've done that.)

2. When a minor emergency arises, you will be able to take a portion of your emergency fund and take care of the issue, rather than having to borrow and go into more debt. Example: you hear that a beloved relative or dear friend has just died. If you have $10k in an emergency savings account (6 months income if you make $20k/year), then you can justify taking $500 for a plane ticket.

3. Your arguments about money will be far less frequent than high-spending neighbors. If you have a savings plan, and are sticking with it, you won't get all fussed about your husband's new Wii game and he won't be upset about your new iPod.

4. You will be forced to make considered choices about where you spend your money. This might mean, for example, more from-scratch cooking rather than frozen convenience meals or fast food. A bonus is healthier dinners and children participating in meal prep, learning how to cook.

5. You will have less clutter and junk around your house.

6. You will be more aware of the needs of the world if you are making a conscious effort to give regularly to charity. Right now, today, I was able to write a check to a reputable relief organization that is working in Haiti. I could not do that if I was living to 100% (or more) of every paycheck.

7. You will buy higher quality goods. This is counter-intuitive. But, think. A $100 purse that lasts three years is a better buy than a $50 purse that lasts six months. I have a wallet from Coach that is almost 4 years old. It looks perfect, brand new. A cheap wallet would look crummy by now.

8. You will be teaching financial and societal responsibility to your children. People with money troubles hide their situation from their children. It's only natural to "protect" children from bad news. If you are responsible with your money, then you can open financial situation to your children, age-appropriately, and teach by example. "Here's my paycheck stub, for example. Look at all these deductions! What are they for? Let's go through them one by one."

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auntofthebride Posts : 9,354 Registered: 4/2/06
Re: best savings option?
Posted: Jan 18, 2010 11:07 PM Go to message in response to: darkchild24

Dear DC,

I'm happy to see you back.

There are many resources out there to teach young people about finances. Go to your local library or bookstore and browse. Another thing you can do, and few people actually do this, is make an appointment with a banker at your bank, and ask about the various savings options. They will be happy to lay them out for you.

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NJ4Life Posts : 3,358 Registered: 8/10/07
Re: best savings option?
Posted: Jan 19, 2010 10:14 AM Go to message in response to: darkchild24

I will recommend ING. I know the interest rates aren't what they were about 2 yrs ago but thats how we saved (and still do) for our wedding. We put a chunk of money into the ING acct every each paycheck. And w/ such a huge interest rate you are really investing it. Thats how I saved for my security deposit for my apartment too, back in the day. And it is SOO easy to transfer money in and out.

We keep the bulk of our savings in ING and just a few hundred in our bank for emergencies. If we know we have a big expense coming we trasnfer money out of ING about a week before as it takes about 2-3 days for it to hit the checking account.

New Jersey: We have dumps, bays and cement boots and we know how to use 'em

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karebeartg Posts : 831 Registered: 6/25/08
Re: best savings option?
Posted: Jan 19, 2010 10:53 AM Go to message in response to: NJ4Life

In addition to ING, it may be worth checking out local credit unions. DH and I bank at a credit union in Massachusetts where we get 4.00% interest on our checking account. They give 0.4% interest if you use your debit card less than 10 times per month and 4.0% if you use it more than 10 times. Obviously, the key with something like that is that you have to be really careful about how you use the debit card - we use it to make 10 small purchases each month to keep the interest rate up, but if you are less careful or less disciplined, it can backfire.

 

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HappyGirl13 Posts : 1,298 Registered: 4/21/08
Re: best savings option?
Posted: Jan 19, 2010 11:21 AM Go to message in response to: karebeartg

I second NJ's recommendation of ING. For a basic savings account, they seem to have one of the best rates out there even though, yes, it is lower right now (and can't touch the 4% karebear is getting!). And they will allow to you set up automatic deductions from your paycheck. Aunt's correct that it's much less painful to save when you don't even see the $$ in your regular account, and it feels quite good to see that savings total go up every month!

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