Re: Savings accounts are a joke...
09-30-2012 01:01 PM
Savings rates are being held at close to nothing due to the monetary policies that the Feds are trying to promote. In order to increase spending and the economy as a whole the Feds are trying to get you and all Americans to use there money and NOT save. There should be an upside to this, as all lending rates should be at historic lows and money should be easily obtainable because banks essentially have an unlimited supply of close to free money. However due to the credit crunch in recent years, banks have clamped down on lending and made it inaccessable to many Americans.
Basically, the rates are all great for borrowing money but will be horrible for lenders (in this case that include you as you are lending the bank your money for close to nothing) for a long long time. Basically until the entire US economy improves drastically.
Yes, just pretend this year is Tuesday, next year is Wednesday and so on. By the time we get to Friday things start looking brighter with a sunny weekend ahead.
So now is the time to be lean and trim those financial calories. When you start your savings, it's what you deposit that matters. It's only later that the interest will stack up against you deposit, and maybe by the weekend too the savings rates will go up.
You stay lean until you can buy a small place. You have been diligent and paid your stuff when due, and so your credit score is high and your mortgage rate will be low, especially as long as the present levels last, which is money down your pocket, aside from the mortgage deductions.
Then put money in your 401K or IRA, which on average generates a high yield. You can't withdraw your retirement money ahead of time without penalty, but when the time comes, you'll be very happy you planned ahead.
The best way to saving is to have income put aside at deposit time. Have the bank transfer a certain percentage to your savings account, so you don't have to do it. Forget about the savings and forget about the savings rates. Get used to living within your checking account. There's a lot to look forward in years to come!