How to Save Page 1
How to Save
Ways To Save Your Money Without Losing Purchasing Power To Inflation
University of the People
Instructor: Getachew Woldie
Due: Wednesday, 6 May 2015
How to Save Page 2
A man seeking financial advice said to his friend, “I need to start saving some of my income and want it to retain as much value as possible, what are my options?”
“You have five main saving options.” Replied his friend. “Cash, checking accounts, savings accounts, bonds, or stocks. When saving you must keep inflation in mind. In order for your savings to retain their value they must at least keep pace with inflation rates. If you wisely invest your savings, then you can actually make a profit with it.
The average rate of …show more content…
You can easily get a checking account that has no fees or minimum balance requirements. A checking account is only a small step above cash when it comes to saving. A checking account is less risky as it protects your money in the bank from being stolen, etc., but it does not protect your capital from inflation. It is also nearly as liquid as cash and is thus a fairly similar option.
Saving accounts, your third option is a step up from the last two options, but not by much. Like the checking account you can get a saving account from most banks. The average savings account has a 0.06% APY, annual
How to Save Page 3 percentage yield, or interest. Thus a savings account is low risk and fairly liquid like cash or a checking account, but still does not keep up with inflation rates.
Bonds, the fourth option also have their pros and cons. A bond is essentially a certain amount of money lent to a company or business for a set amount of time. A bond issuer such as the US Treasury first decides that they need say $1 million, they then divide it up into say $1,000 sections (the price of a bond is determined by supply and demand). Bond holders buy those bonds and at the end of a period they turn their bonds in to receive their initial amount back plus some interest. The amount of interest the holder receives is based on the riskiness of the bond and the market rates. The benefits of bond holding are the interest which can help counteract the
The bonds can be issues with fixed interest or variable rate interest, each of which has its advantages and there disadvantages.
The first bank I researched was Municipal Credit Union. Municipal Credit Union is a state chartered credit union headquartered in New York City, regulated under the authority of the National Credit Union Administration. After investigating its financial services and products on the website, I found that they offer checking accounts, credit cards, CDs, mortgages, home equity loans (line of credit), and IRAs. The benefits to customers involve free online banking with bill pay and eStatements, a
In return for that money, the issuer provides you with a bond in which it promises to pay a certain rate of interest during the life of the bond, and to repay the face value of the bond (the principle) at its maturity date. Among the types of bonds available for investment are: U.S. government securities, municipal bonds, corporate bonds, mortgage- and asset-backed securities, federal agency securities and foreign government bonds. Zero-interest or coupon municipal bonds are my number one choice because these bonds can be purchased for a small amount, then at its maturity date, or earlier call date these bonds usually pay the face value. Now to me, this is a smart investment choice especially for retirement.
3. Begin with 3% of your pay going into retirement savings. Each raise/promotion you get increase it by 1% until you have reached your employer’s maximum match rate. Then add the 1% into an IRA until you have reached the percentage that results in your desired retirement account.
Saving money is an important part of your financial health. The more you save, the more you can feel at ease whenever a rainy day might hit. You cannot predict the future but you can prepare for it. If you prepare now, your future self will thank you. But how can you save if you have so many bills and only one stream of income? Here are some tips you can use to rack up that account with a single income.
Many government related institutions issue bonds, some supported by the revenues of a specific institution and some guaranteed by a government sponsor. For example, in Canada they have a bank that issue bonds that are guaranteed by the
Savings account. This is one account which you should automate considering that you are likely to change your mind should the account be handled by yourself. On hand, there is the temptation to defer saving and use it on something else which you really do not need. Savings account may include those intended for emergency, retirement, and personal