Feeding Your Piggy Bank
Saving money is one of the smartest things you can do for yourself and one of the easiest ways to do it is to open a savings account and start putting money in it! However, not all savings accounts are created equal. If you're just getting started, having a savings account through the same bank as your checking account is definately not a bad idea. The accounts will be linked, making it easy to instantly transfer money from your checking account to your savings account. If you can afford to schedule an automatic transfer each month, do it. Bank of America has an option called Keep the Change, which automatically rounds up your check card purchases to the nearest dollar and deposits the change into your savings account. (If your coffee was $2.45, it will be rounded up to $3.00 and 65 cents will go into your savings.)
If you already have some money saved, but you're not earning much interest on it, start looking into types of accounts that will help your money grow faster. Online savings accounts generally offer much higher interest rates than your average brick-and-mortar bank and are very easy to set up! You can check SavingsAccounts.com to see all the current interest rates for various banks. I use (and recommend) FNBO Direct and American Express Personal Savings because they are both very easy to setup and have some of the highest interest rates available. Check the terms and conditions of an account before you apply. Some banks require a minimum balance and/or annual fees. You can link any of these accounts with your checking account so that you can transfer money online. You'll will likely be able to request an ATM card for your account as well, but you should only use it for emergencies (or decline it altogether) since you don't want to take money out of your savings unless you absolutely must.
So what are we saving for, anyway? Well, that depends on what your goals are. Everyone should have an emergency fund just in case you lose your job, your car breaks down, or any other unexpected expenses arise. According to G.E. Miller, contributor to 20 Something Finance, the general rule of thumb is to have three to six months of living expenses put aside. If you're not there yet, no problem. Just keep putting money away as you are able to. Once you've reached your goal, you can focus on saving for other things such as retirement, a vacation, or a boat! You don't even have to know what you are saving for now--you will eventually think of something that you want. Check out Miller's article, How to Set up An Automatic Savings Plan, for more tips and ideas.
Other ways to save? If your employer offers a 401(k) match, definately start contributing! It's basically free money from your employer that you wouldn't get otherwise. Go to Money Under 30 for more information about contributing to a 401(k) in your twenties. If you don't have that option, look into opening a Roth IRA. Check out these Roth IRA Rules of Thumb.
