Here’s my situation:
I finally will have a little (very little, but it’s a start) money to save each month. I have a regular savings to which I will contribute, but I’m thinking it would be wise to do something more long-term, as our savings seems to get used up with rather alarming frequency.
Now, I am a terrible saver. I put money in savings, and within a week or so I find a really good sale on galoshes or something, and figure I should stock up, and one thing leads to another…voila! no more savings! So I need to put away $25 or so (hopefully more, but there’s no guarantee) a couple of times per month, and it needs to go somewhere more difficult for me to access.
I know there are cds, etc, but don’t most of them require a more substantial starting deposit? I am starting at zero, basically.
I know there are folks here who are far more savvy with money than I am, so what say you?
Thanks!
~karol
What are they paying right now? I bought some once when they were guaranteed to pay
9.5% forever…anyway, my bank is paying .25% on savings accounts right now, so Im sure those bonds pay more.
AH, here are the rates:
http://www.savingsbonds.com/rates.cfm
Imagine that, savingsbonds.com
Bodypoet,
I don’t know much about your situation but buying Bonds isn’t the best investment you could make.
Bonds have really low returns that barely keep up with inflation.
If you really want to invest this is what I would suggest.
#1. Open a savings account and put the $25 extra in the account whenever you can. At the same time destroy the accounts ATM card and make it hard for you to get to the money. Pretend it doesn’t exist.
#2. When you get $500 saved talk to brokers in your area. There are some brokers that will open an account with $500. When you talk to them ask for any documents they can give you about investing. I suggest talking to a Charles Schwab broker. You will want to bluff and pretend you have about 5K to invest. Schwab will give you free material about the basics of investing.
#3. Read the material. Focus on the Mutual fund stuff. Mutual funds are a pretty easy for a newbie to understand.
A) Look for mutual funds that have a good 5 to 10 year track record.
B) Make sure that the fund manager has been around for the life of the fund. If the 5 year track record for a fund is great but the fund manager has only been on for 5 months then the track record doesn’t mean much
C) DO not buy mutual funds that have loads. Loads are costs you pay to the mutual fund company for buying in to a fund. There are a whole lot of no-load funds out there.
D) Check the admin costs of the fund. The lower the better.
Mutual Funds are a great starter investment for a newbie. Once you pick a fund you need to check up on it about once a month. Picking a good fund isn’t hard and the returns are way higher than what you would get from a Bond.
To give you an idea about how important investing is here is a fact:
If you started at the age of 21 putting $2000 a year into an investment that returned %9 a year and stopped investing at the age of 30 you would have roughly 550,000 at the age of 65. (Assuming you did not touch the money) If you started at the age of 30 putting $2000 a year into an investment that returned 9% a year and kept that up until you were 65 you would have 440,000 in the bank. Starting early makes a big difference.
Slee
Savings bonds don’t pay a lot of interest, true, but they are about as safe an investment as is possible to make. Bought regularly and held to maturity, they can build a nice nest egg.
Y’know, I used to put money into a mutual fund on a regular basis, back when I had a “real” job. When I left teaching, I pulled out my money, but was required to leave the interest, which in a year or so had built up to about $1000.
When everything went downhill, it lost money, but now it’s back up to close to 1000, I think...
Maybe I should contact my mutual fund guy and see if I can begin putting in that again? Hmm…
Thanks for the thoughts, I’d be happy to hear more opinions about this stuff.
~karol
Savings bonds are currently earning 3.97%. That’s a pretty good rate (savings accounts around me pay about 1.90%), especially since the interest is tax-deferred. Judging by your description of you saving pattern, savings bonds is a pretty good way to go – you an put in a small amount and you won’t be touching it like you would with a savings account. If you have enough to make the minimum for you bank’s CDs, you may get a little higher rate, but if not, go with the savings bonds.
Well, my bank is giving .25% interest on savings accounts. Me, the clerk & the manager had a laugh when
they told me that. So, savings bonds are nice & very low risk. As I would say, you eat better
on 8% but you sleep better on 4%.
I recommend it, but remember, they’re savings bonds so think of them as savings, as opposed to something like a mutual fund or stock. I have $200.00 taken out of my pay each month to buy savings bonds. This is in addition to my 401 whatever-the-letter-is. A week or so after payday I get $400.00 face value bonds in the mail and add them to the stack. I did a brief stint of the same at an old job. What I like about savings bonds is that they earn more than my savings account and they’re a little harder to dip into. Even though the return isn’t fabulous, it’s guaranteed, and at this point (after a year and 3 months doing it at this job plus a year at my old job) it’s nearly $4000 I would have just pissed away had I not gotten the bonds. There should be away you can do it automatically. If you do it automatically, just put away enough so you don’t notice it. Don’t put too much of a hurt on your budget or else you might stop it.