By: Cleo Washington, Intern, Financial Literacy Writer | cleowash@umich.edu
Growing up, did you collect spare coins and cash in a jar or piggy bank? Perhaps you wanted to purchase a new toy or the latest video game. Regardless of your intentions, you practiced a skill that will be necessary for the remainder of your life: saving.
Saving is the act of setting aside money for future use, including both regular expenses and unforeseen emergencies. This provides financial security to accomplish your dreams or respond to any setbacks.
Whenever you receive money, either from a job, an allowance, or as a gift, you should set aside a portion, at least 10%, of it for your future self. How exactly do you save? Here are some tools that you can use:
Savings Account: A bank provides these highly accessible accounts, where your money is insured by the Federal Deposit Insurance Corporation (FDIC), up to $250,0000. These accounts offer minimal annual percentage yield (APY), essentially the bank giving you compound interest (money) for banking with them, but at a higher rate than a checking account.
High-Yield Savings Account: These accounts offer a higher APY than traditional savings accounts, and are prominent with online banks.
Money Market Account: These accounts also offer a higher APY than traditional savings accounts, yet they also offer checkbooks and debit cards.
Certificate of Deposit (CD): A savings account that locks a fixed amount of money with the bank for a fixed amount of time, compelling the bank to give you a higher APY.
These are just a few examples of accounts that you can use to save your hard-earned money. Whether you use these options or other methods, keep this in mind: the earlier you begin saving, the better off you will be in the future.
Your purchases as a kid will pale in comparison to what you can acquire as an adult – cars, a home, vacations – all due to the money you saved early on.
Author: aryanethsales
