This post by Christina Moore offers some great advice for making your money work. As a single mom, we need to be emotionally aware of our money habits in order to have better control of it. How we spend our money is our self worth.
Every day you make hard choices because money’s tight and you need to stretch your pennies as far as they can possibly go. You try to put some money away every week (or month), but you can’t help but feel discouraged when your savings doesn’t grow the way you want it to.
Here are some things you can do to change that:
1. Stop Dipping
Your savings is for genuine emergencies, your retirement and your kids’ college education. It is not there to help you afford brand name items or vacations when the family just needs to get away. You can save for those things too, but you need to put that money in a separate account.
But hey! Sometimes bills are more in one month than they are in another!
Yes, this is true. Here’s how you deal with that: in your monthly budget make sure you’re budgeting for at least whatever your highest bill was last year. This way the money is already there and you’ve planned for that big bill. It won’t feel like a shock. During the months when your utility bills come in lower than you’ve planned; put the money in your savings.
While you’re at it, un-“hook” your savings account from your checking account. This way you can’t transfer money on a whim.
2. Get the Right Account
It’s good that you’ve opened up a savings account but are you sure you’ve opened up the account with the right bank? There is no rule that says you have to have your checking and savings account in the same bank.
Do some research. Consider opening your savings account at a credit union or an online bank. Credit unions and online banks generally require lower minimum balances; have fewer fees and offer better perks. They also, on average, offer better interest rates for savings than you could get with a traditional bank.
The interest rate offered to your savings account is important. It’s what helps you grow the money you’ve saved. It’s true that while your accounts are small, the interest probably won’t add up to much. But, thanks to the way it compounds, it earns more and more every year. And, if there’s anybody who appreciates the way that those nickels and dimes will add up, it’s someone who is used to managing her money to the penny.
In addition to looking at the interest rates on savings accounts, try to find a checking account that offers you perks (some banks will offer the same sorts of perks to checking accounts that they give to credit card holders). As someone on a tight budget, try to find a checking account with an institution that will refund ATM fees and/or offer you cash back for using your debit card instead of paying with cash. You will be amazed at how much more money you’ll have in your account when you get these two deals.
PRO TIP: Take the cash back you earn every month and squirrel it away in your savings account.
A Word About Investing
As someone who is working hard to build up her savings account, the idea of investing in anything serious is probably laughable. But that doesn’t mean you shouldn’t do it. In fact, there is one investment option that was built specifically with your situation in mind: the CD.
CDs (Certificates of Deposit) are basically just savings accounts that you aren’t allowed to touch for a predetermined amount of time. As a reward for not dipping into the account, the bank holding the CD gives you a higher interest rate on the CD (especially if you can get the best CD rates) than you’d get on your regular savings account. It’s a great way to start growing your money and getting your money to work for you.
Before you open whatever CD your bank tells you about, though, make sure you do your research. It is important that you find the best CD rates. Like with savings accounts, you will definitely get better rates for online CDs. For example, Discover CD rates are, on average, 0.95% for a CD with a one year term, while the average CD rates through traditional banks (according to Bankrate.com), are only 0.74% for a one year term.
You’re probably noticing a theme. That’s because there is one. The key, the real key, to saving and getting your money to work for you (especially when you don’t have a lot of it) is to do your research, put money away and then keep your hands off of it. It’s hard, yes—but you’ll be glad you resisted the temptation (and took measures to restrict it) later when you can afford your retirement.
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