1. A money market account is another name for a savings account. True or False?
. Money market accounts are similar to savings accounts in that both are interest-bearing and FDIC-insured. However, money markets typically have a somewhat higher minimum balance requirement (often $1,000 or more). In return, though, they offer benefits such as higher interest rates and the ability to write checks from your account. For these reasons, money market accounts can be a sensible place to stash emergency funds.
2. I should put about 10 percent of my income into savings. True or False?
. Ideally, experts recommend putting 10 percent of your annual income into savings of some type, with about 60 percent of your income designated for essentials like rent or mortgage, food, etc. If you can’t swing the full amount yet, start with what you can afford and continue to increase as you can.
3. Paying off debt should always take precedence over building a “rainy day” fund. True or False?
. What makes sense for you depends on your specific situation. For instance, if you have no real savings, then setting aside a one- to two-month safety net may be your first priority. But if you have some savings and could erase your debt with a few months’ focused effort, the payoff could take precedence. Ultimately, you may want to direct a higher proportion to your primary goal until it’s achieved, while simultaneously putting a smaller amount toward your secondary goal.
4. There really is such a thing as “free money.” True or False?
. Whenever your money earns interest, you get funds you didn’t have to work for — in other words, free money. If your employer contributes to your 401(k) account, that’s another path to free money. Plus, many IRA products have tax-preferred features that may allow you to earn tax-free interest or make pre-tax contributions that lower your taxable income. Taking advantage of these opportunities can be an easy way to grow your savings.
5. I should focus on my retirement first, and then think about funding my child’s college education. True or False?
. There are a variety of resources available to help young people pay for a college education, such as loans, grants, scholarships and work-study programs. But nobody will finance your retirement except you. So if you have to choose, this is one time when it’s not just okay, but actually smart, to put your own needs ahead of your children’s.
How’d you do?
Whether you missed some answers or scored 100 percent, you’re on the right track simply by taking time to focus on savings strategies and learn all you can about putting your money to work for you. As your financial partner, we’re happy to help you develop a personalized plan to meet your financial goals. Just stop by and talk to the experts at your local Rabobank branch any time.
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We have a variety of savings solutions to fit your needs, including:
• Personal Savings
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about your options and the benefits you enjoy with every Rabobank savings account.
The information contained in this article is intended for general educational purposes only and is not to be construed as legal, tax, or financial advice. Please consult with your own legal, tax or financial advisor for guidance with your own particular circumstances.