Making Money Work For You

If you are a good manager of money, one goal of your personal finance plan will be to put your savings to work for you. Putting the money aside regularly so that a good-sized emergency fund can be built up is the hard part. But that isn’t all there is to savings. We assume you don’t intend to stuff your savings into the mattress or hide it between the pages of a book. Where will you keep your savings?

Put your savings where it will earn interest or dividends while it is waiting. That is what is meant by putting your money to work for you. Money you keep around the house is idle money. It’s also money you risk losing, since it can all too easily be lost or stolen or destroyed by fire.

There are many places which accept deposits of personal savings, pay interest on the money for as long as it remains, and offer you a high degree of safety – often insured by the Federal government. One of the most popular of these is the savings account at bank.

Many people use to prefer to put their savings in government savings bonds, feeling that this is the safest place in the world to put their money. Too, they like to feel they are helping our national economy. The most popular of these savings bonds – Series E – pays a little more than most banks pay. However, this rate of interest is earned only when the bond is held until its maturity date. If it is cashed earlier, it earns a lower rate of interest. This fact often serves to discipline people against cashing in their bonds before maturity and helps them protect their savings.

Some large business organizations encourage employees to save money regularly. To do this, they will offer to deduct from the employee’s paycheck any amount authorized and deposit it in a 401K retirement account. If your company offers you this and often they match a percentage based on your pay, try to make use of it. It’s a good way to save systematically.

Investment in corporate stocks and bonds can also be a profitable place to put savings this includes mutual funds as well – but only if you proceed cautiously. Many financial advisors feel that no one should consider this type of investment until one has built up an emergency fund of ready cash and also has sound insurance policies in place. Others suggest that for long-range savings an investment in mutual funds has real advantages because the invested dollar is less likely to shrink because of inflation.

Of one thing you can be sure: the stock market is not an easy road to riches. If you hear someone brag that he picked up a tip on a sure thing and bought some common stock at $15 a share a year ago which is now worth $85 a share, you can be pretty sure he isn’t telling about all the other investments on which he lost money. There are people who study the stock market and who make shrewd investments which increase greatly in value. But even the experts suffer stock losses sometimes. The stock market is no place for the amateur, nor for the family which may need the money and be forced to sell their holdings at a time when the stock price is down.

For the family with a good insurance program and adequate liquid savings, the soundest way to invest in stocks and bonds may be to buy shares in a mutual fund. Each dollar invested is split among the stocks of many large companies. You, yourself, do not have to make the weighty day-to-day decisions of what to buy and what to sell. That is done for the mutual fund organization by professional investors who are paid from the fund for their services. You don’t make a “killing” in this type of investment, but neither do you take a beating. Over a long period of time, you may earn reasonable dividends; and if the economy goes up, the value of your stock goes up also.