I graduated college a years and half ago with little idea how to save money other than to put it in a bank account. High School and College does not prepare you or teach you where or how to save money. So here are some tips to save money and make interest on your money.
- Drop your big bank (Chase, Wells Fargo, Bank of America), and get a local bank.
Why? The big banks essentially no interest on your money, you’ll essentially putting it under a pillow
- Bank Of America = 0.10% interest. Or 1 buck a year if you keep 1000 bucks in your account
- Wells Fargo = 0.05% interest, or 50 cents a year if you keep 1000 bucks in your account.
- Chase = 0.05% interest, or 50 cents a year if you keep 1000 bucks in your account
My local bank give 0.50% interest on a normal saving account (5 bucks for 1000 bucks). While it might not seem like much it is still 5 to 10 time more than the big banks are giving you
- Open up a Money Management Account. A Money Management account requires to keep a certain amount of money in the account (or you get a fee). In most case the amount is $2,500. In return for keep that amount of money you get a higher interest rate (Any where from 0.7% (7 bucks for 1000) up to 1.5% (15 bucks for 1000)). This type of account will give you 15 to 30 times that a normal saving account would give you.
- Ladder CD’s. The highest interest you can get from a Bank tend to be a CD(Certificates). What a CD is, you give the bank X number of dollar for X number of month and you earn interest on it. The more money and more month you agree the high interest you make. You normally can buy 3, 6, 12, 18, 24, 36, 48, and 60 month. To ladder CD’s what you buy a 12, 24, 36, 48, 60 with the same amount, so that each year one of them will age and you reinvest it in to a 5 years. (Locking in the highest interest).
- 401k. If your employer doesn’t match what you put it, then start with a Roth IRA. If your employer matches to a certain point (like the first 3000 bucks) put 3000 bucks in your your 401k. At the end of year you’ll have 6000 (3 you put in 3 your company put in for free). if there is no limit on how much they will match, put it as much as you can, its free money when you retire. Remember though you can’t touch this money until your 59 1/2 so make sure you have enough money to live off of.
- Start a Roth IRA. A Roth IRA is like a 401k, except the money grows without interest. You can put up to 5000 bucks a year in to it. The best way to safe for this one is to make a budget. Find out how much extra cash you’ll have every month and put some amount of that in the IRA.
- Stop taking 20 bucks out at an ATM… You should never ever be going to an ATM more than once a day, hell once a week. If your going to the ATM every day to take 20 bucks out (and getting a 1-3 buck fee for each). Go to the ATM once a week and take 140 bucks out. You’ll cut the average fee your paying by 85%.
- Create a budget, or use mint.com and try to stick to it. Best way to start a budget is to look at the last 2 or 3 month of your spending before it to get an average of how much your spending and on what. From there you can tell if your spending to much on a certain category or not.
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