If you have ever made a resolution to get into shape or lose weight, you know how establishing a habit works. You sign up for a gym membership, get some kind of awesome workout gear and learn to love eating kale.
If you stick with it, you get the benefit of a healthier body, more energy and the praise of friends and family. What if you knew that saving money was just like exercising in a lot of ways? It’s true. When you get into the habit of saving your money, you could find that your money will work just as hard as you do.
As with any habit, the first few months of saving money is the most important. This is where you put in whatever you can, and it may not be much. Like learning how to jog to the end of your street and back, every little bit helps. Even dropping your pocket change into a jar at the end of the day could add up to hundreds of dollars by the end of one year. If you keep your goals reasonable and avoid trying to make too many changes at once, you will see that your finances will stretch out a bit easier each day.
Build Up Money-Earning Muscle
Fitness experts say that the best way to get into shape faster is to focus on building muscle, and saving money is similar. Muscle is more efficient and the more muscle tone you have, the better your body runs. Once you have even a few hundred dollars saved, you can put that financial muscle to work for you. There are many ways you can invest your hard earned money.
Share Certificates, or CDs work like a time-capsule. Your money is secured for a certain length of time and earn a rate of return. The longer you leave your money in the share certificate, the higher interest rate you’ll receive which in turn, means more money for your savings. Sounds great, right? Achieve your savings goal with a share certificate.
A Money Market Account is an option that allows you to earn a higher rate on your savings account. They often come with higher interest rates than regular savings accounts, offer flexibility to withdraw funds in case of emergency and are insured by the NCUA.
There are several types of Individual Retirement Accounts or IRAs to help build the health of your savings. When you open an IRA account, you can make regular contributions to secure your investment. Depending on your employment status, IRAs can have different tax liabilities. Choosing the IRA that’s best for you, whether it’s a Traditional IRA or Roth IRA, it’s important to help build your financial wealth for the future.
If you are willing to give up immediate access to this money for a few months - or years, depending on the path you take, you could get a higher return on your investment. As your savings builds, you keep earning interest on the money in the account. That means that you could also earn interest on the interest paid to you, which helps your savings grow even faster.
Reap the Rewards
Like your gym membership, your savings will continue to benefit you as long as you make it a priority. Everybody trying to get fit sets a goal for the all-important “maintenance phase.” For your savings, that is your retirement. You may have heard that people who invest a few thousand dollars and leave it alone could end up with hundreds of thousands of dollars decades later, and this compounding interest is how that happens.
What you should keep in mind is that investing is not a “now or never” proposition. The more money you keep putting in, the more money you get back. Even starting a savings account in your 50’s could have an impressive rate of return by the time you hit retirement age.
Improving your financial fitness takes time, a willingness to work hard, and the right approach to savings. Need help taking that first step? Take advantage of our investment services to help whip your finances into better shape.
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