Instructions

The first recommended step is to. set a budget. This will aide you in setting those necessary limits with savings. Identify the Needs vs. Wants. Determine how much money you can put away to save after each pay period. There are many resources that can help with setting a budget. Try yahoo finance, its really helpful with a bunch of expense calculators and other tools. Once you have established a doable budget, then you can now look into saving you money.

When looking for a savings account don’t jump at the first one you see. Take your time and look at the features of the account. There are many different types of savings of accounts depending on your need. A couple of things to look for in a savings account; a the lowest possible minimum deposit; the lowest penalty fee; a moderate rate of return.

With most, if not all, savings accounts they require that you make a minimum deposit amount in order to open the account. Some range from $100 — $1000. That’s why you should look into different savings account with different institutions to see what they offer and what suits you.

Next you want to look at what is the penalty fee for early withdrawal. The banks use this penalty as a way to keep you from dipping into the funds. Now just as with the minimum deposit amount, this also varies, so definitely look into this as well.

And another thing to look into is the rate of return. The rates on savings accounts also vary, but they’re usually between 1%-3%. You would be lucky to find a better one. You shouldn’t be too concerned about the rate of this account because the purpose of the mutual fund is to earn you a higher interest than on your savings.

Once you have found a savings account that suits you, now its time to find a mutual fund to invest in. Mutual funds work sort of like saving accounts, but sometimes with more restrictions. You should use the same precaution with mutual funds as you did with the savings accounts. Contact a bank or a company that you’re interested in and ask them to tell you about how a mutual fund works and its policies. You might want to do you own research on line, there’s a lot of useful information out there. Just do a search on mutual funds and do some reading.

Take your time when making a decision in the right fund, make sure that you understand that this is an account that you do not plan to dip into. Its meant to save/make you money over a long period of time. On the contrary, the purpose of your regular savings accounts is to have funds in case you need it. You shouldn’t touch this money, although you can if you need to.

A good thing about mutual funds are that they earn you a higher than usual return. As high as 12% (although it could be higher). Because of the way it functions, the fund is able to gain you a return higher than that of a regular bank.

Now that you have both a savings account and a mutual fund account, what you want to decide now is how much to put away in each account. To make this easy you may want to split your savings in half and put 50% in your savings and 50% in the mutual fund. Its up to you how you decide to split funds, just keep in mind the purpose of each. One is to save and dip into just in case. And the other is to save, earn a high return and not touch for a long time.