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By: Nancy B. Secrist
Ext. Agent
Saving Is More Than Not Spending...How does one manage savings? Managing to save is a problem for many. Saving a small amount regularly is usually better than saving larger amounts sporadically. For example, $5 put aside every month at 4Vi per cent interest compounded quarterly would add up to over 13 per cent more in five years than the same amount put aside at the same interest rate only once a year. The $5 deposited each month amounts to $491. and the $60 deposited once a year amounts to $434.
Savings can be divided into emergency funds, savings for specific goals and regular savings. Emergency funds should be saved and used for repairs, medical expenses and other unexpected emergencies that are real needs. Savings for specific goals such as college education, a special trip, a new car or retirement is the second type.
Regular savings should be made for family security, in case of a reduction in income. (Then buy disability insurance to cover the real catastrophic illness or death.)
The third aspect of savings is to make use of savings instruments that best meet your objectives. For example, keep only enough in checking accounts for living expenses and to cover minimum balance requirement. Shift the extra to pass book savings or credit union shares. These two savings instrument pay interest and yet money is readily available if unexpected expenses occur.
Keep only the minimum amount of emergency money in passbook savings. This amount may range from $500 to $1500 depending on the way you plan to use this fund. Then for all other savings use certificates of deposit, treasury bills, bonds or various types, stocks, municipal bonds, etc. The ones you choose depend on the importance to you of liquidity rate of return,
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