“We worry about what a child will become tomorrow, yet we forget that he is someone today.” – Stacia Tauscher, dancer and artist
Building your savings is a lot like raising a child. Both require balancing the needs of today with the needs of tomorrow. Each requires consistent, daily commitment to growth toward the future you want. Taking inspiration from the time and energy invested in families every single day, we offer some strategies for saving money for tomorrow’s urgent demands and for future years’ uncertainties.
For Today: Savings Accounts
Emergency funds and short-term savings need to be accessible for, well, emergencies. You need to get your money quickly. Think of an emergency fund as accessible savings you use to maintain your normal lifestyle through any unforeseen expenses or emergencies. High-yield savings accounts are the best place to stash these funds for any rainy days on the horizons. Read our previous blog on savings accounts.
Set a reasonable first milestone. For example, your goal could be to save $250 by the end of August by putting $50 each month into your savings account. Now, identify how to trim $50 from your expenses to generate savings. Some options include cutting back on monthly subscription services or using public transportation instead of driving every day. And then – this is key – be sure to transfer any savings directly into your savings account as soon as possible so that you don’t impulsively spend the money elsewhere.
For Tomorrow: Savings Bonds
For mid-term financials goals – three to ten years out – you want to invest money in less accessible accounts. Savings bonds aren’t as popular as they were in years passed, but they’re still around! They’re an essentially risk-free investment option backed by the U.S. Department of Treasury with a low minimum investment (as little as $25), no ongoing fees or expenses, and protection from inflation. However, they do have low rates of return compared to other investing alternatives and they cannot be redeemed within a year. If redeemed before five years, you lose interest earned from the last three months.
A Series EE U.S. Savings Bond has a fixed interest rate, whereas the Series I U.S. Savings Bond has a composite interest rate based on both a fixed and inflation-adjusted interest rate as measured by the consumer price index. The fixed rate remains the same while the inflation-adjusted rate in the I bond changes every six months. The composite rate for I bonds issued between 11/01/17 and 04/30/18 is 2.58%. Interest accrues annually and interest earned is not subject to state or local taxes. However, interest is not paid to you until the bond is redeemed or reaches maturity and federal taxes are paid at that time as well. Learn more about savings bonds here!
Get Started Now! Work with a Money Mentor through Prepare + Prosper
Apply to work with a volunteer financial coach once a month for six months (April – September) through Prepare + Prosper’s free financial coaching program, Money Mentors. Money Mentors is an individualized approach with peer support that helps people take action to reach their financial goals. Financial coaches will listen, push for progress, and cheer participants on to the finish line. Meeting with a P+P Money Mentor, up to 3 times, would qualify for Exodus Lending’s financial counseling incentive!
Sound like a good fit? Learn more about the program and apply online by March 26.
Money Management E-Newsletter: March 2018