|
||
Did you know that people who maintain a savings account and regularly deposit money into it have a far better chance of becoming wealthy by the time they retire than people who don't hold a savings account? While it's true that simply depositing a few dollars each week into a savings account won't turn you into Bill Gates overnight, the fact is that people who can effectively manage their money, even in smaller amounts like opening a savings account and adding a few dollars on a regular schedule, stand a much greater chance of retiring wealthy than people who don't have a savings account. The theory is that people who can be thrifty and save money when they have very little of it can be just as thrifty when they eventually get a higher paying job, reduce their expenses, or come into money in some other way.
Also, many financial institutions are offering a product termed a high yield savings account. This type of savings account will usually require someone to set up a regular schedule, via direct deposit, of a certain amount of money over a specified period of time. In return, the institution will offer an extremely reasonable interest on the amount that you deposit. Currently rates are approaching 5%, with some institutions offering rates over 5%. Also, if you maintain a higher balance on your account you can receive an even higher interest rate. High yield savings accounts are a great option to consider at anytime, but people who should be especially interested in this are younger people without enough money to really get into serious investing. Even tiny amounts of money invested regularly over a long period of time can add up to an enormous amount due to compound interest.
The key to generating a nice sum of money in your savings account is very simple – don't spend it. Many people think that just because they open up a savings account with a decent interest rate that they can just go ahead and take a little out every month to spend. When they see their balance is grown by a few hundred dollars they go ahead and take out $50 to buy a new toy. Doing this is a surefire way to shoot yourself in the foot, and nobody will ever become wealthy by spending their money instead of making it work for them. High yield savings accounts can be a great tool to invest money and earn a good interest rate, and when combined with a high yield checking account will provide for easy access to the money if it is needed.
Try to leave the money in there unless an emergency comes up and you absolutely have to have it. Start by opening up a regular savings account at your bank, and then making regular deposits into it. Most banks will let you set up a payment schedule where they just deposit a certain amount from your checking account into your savings account on a certain day every month. Don't think about that money, pretend it doesn't even exist, and after a few months of running your system like that your budget won't even miss that money anymore. Check your balance at the end of the first year, and remember that the way compound interest works, the longer you keep that money in there without reducing the balance in the account, the more you will make off of it.
However, the world of investment is complex and, while many millions of people benefit from playing the investment game every day, it is certainly not suitable for everybody. So, if you are tempted to get in on the act, here are a few things to think about before you take the plunge.
The availability of capital. Although it is not necessary to have large sums available for investment you are clearly not going to receive any substantial income or grow your capital to any great degree unless you have reasonable funds available for investment. You should also be prepared to tie your capital up for some time. If you are likely to need to get you hands on your money reasonably soon after investing it then you will be better off simply putting it into the bank.
Your level of knowledge. Just how much do you know about the world of investment? If you are going to invest in stocks and shares for example then you need to understand the stock markets in some detail. The fact that you know more than the average man in the street is a starting point but you will need both a breadth and depth of knowledge of your chosen area if you are going to keep your loses to a minimum and maximize your gains.
Risk taking. Although not always the case, in general, the greater the risk the greater the reward. But what is your attitude towards risk? If you are happy to take a risk in order to gain greater reward then you must also be prepared to accept that you could very well loose a substantial part of your investment.
The time you have available. As with many things in life, the secret to success lies in having both knowledge and accurate and up-to-date information. This, in turn, means having time to research your chosen area in depth and to keep abreast of the latest news and developments.
Your current financial position. You should think about investing surplus monies only when those monies are truly surplus to your requirements. Do you, for example, have sufficient money in the bank to cover emergencies? Have you made provision for your family in the event of your death? Are you and your family adequately covered for health care? Have you paid off the mortgage on your house? Before you start to take risks with your money in the world of investment make sure that the financial foundations of your life are in place.
The stage that you've reached in your life. For many people it is only when they reach their more mature years that they have the capital available for investment, but is this a good time to enter the world of investment? If you loose your shirt when you are young then it is not the end of the world as you still have plenty of time to get another one. If you loose your shirt in retirement however it may not be quite so easy to replace it.
The outlook for the future. It is one thing to make decision based upon your situation today but what is going to happen in your life in the months and years ahead? Many people find that their needs are considerably reduced as they grow older and they simply do not need a great deal of money to satisfy their needs. But what happens when your children run into difficulty and you want to help them out? Perhaps more to the point, what will happen if you or your partner fall ill and need extensive medical treatment, or even long-term care? Medical bills can very quickly run into thousands every month when you start looking at full-time care.
Investing your money wisely allows you the opportunity to both grow your capital over time as well as providing you an additional source of regular income and there are many excellent high yield investments available today. However, before you enter this particular world, think carefully about whether or not you really want to, and can afford to, play the investment game.