🍃🍃PERSONAL FINANCE PLANNING
When personal finance planning is a part of your life big things happen. You will save money and understand what savings account will land you in positive territory. Personal finance planning begins with understanding how to save money for and on everything.
Savings account interest rate affects growth, and how that rate is calculated. Using Personal finance planning, you will know what savings account pays well. Then you can identify the best savings for retirement after reading this entire article.
You’ll learn how to use the savings goal calculator on my calculator site to keep up with all savings goals. A savings goal calculator is essential for personal finance planning. This calculator will show you how a savings account interest rate affects your bottom line. There is a right way to calculate interest rates and a wrong way, you will learn the right way.
🍃🍃UNDERSTAND WHAT SAVINGS ACCOUNT WILL LAND YOU IN POSITIVE TERRITORY
Learn what savings account gives different results with the same starting balance. What savings account lands you with the highest balance depends on the type of account.
Low balance savings accounts are passbook savings, CDs, and money market accounts. High balance savings accounts are mutual fund index accounts and dividend-paying stocks.
Most savers use the passbook savings account because it is both convenient and familiar to them. They don’t know they have other high-interest options.
Personal Finance Planning Begins With Understanding The Tools of Finance-Lois
The mutual fund index savings account is one of my favorites for many reasons. One reason is that most are both low cost and low risk. This means the fees paid to own one are very low. The low risk comes becomes there are many stocks in the index that makes up the index mutual fund.
An entire sector of stocks in an index is included in the fund such as the S & P 500 index, it includes 500 quality stocks.
With a savings account, you make money with simple interest on new money placed. In a mutual fund, account money is made on the principal and the interest. Interest in a mutual fund is compounded, meaning interest is paid on principal and interest. So, what savings account you choose makes a difference.
🍃🍃LEARN HOW A SAVINGS ACCOUNT INTEREST RATE AFFECTS GROWTH
One of the most important aspects of a savings account is to learn how savings account interest rate affects growth. You can literally start with 1000 dollars in two different accounts. In 5 years, one will have 1,050 dollars, and the other will have 1,600 dollars.
The first has simple interest and the second has compounded interest. What savings account interest rate is chosen early determines interest over time.
🍃🍃KNOW THE DIFFERENCE BETWEEN A SAVINGS VS. INVESTMENT ACCOUNT
The difference between a savings vs. investment account varies widely. And an investment account is also a type of savings account. Most savings accounts are short-term simple interest accounts. While investment accounts are compounded interest accounts and are held long-term, usually 2 or more years.
This is the main difference between a savings vs. investment account. As I stated before a simple savings account does not get compounded interest.
Also, a difference between a savings vs. investment account is choice. With an investment account, you have a much larger choice of accounts and investment vehicles.
🍃🍃WHAT SAVINGS ACCOUNT PAYS WELL NOW, AND IN THE FUTURE
What savings account that pays well now is one that has compounded interest. That account will take you well into the future. This falls in the category of the investment savings account.
The compounded interest savings account that pays well is suitable for many savings investments. Retirement, college, home buying, car buying, and vacations, are ideal for a savings account that pays well. When chosen carefully, balances go up over time, preferably for 2 or more years. These balances can be used to fund any of the major investments above.
🍃🍃WHICH SAVINGS FOR RETIREMENT WILL ALLOW YOU TO RETIRE
Savings for retirement include a 401k plan, social security, a pension, or your own IRA plan. All these plans vary widely. I mention each one for a specific reason. And these are only a few of many.
Many employees have access to a matched 401k plan and don’t use it. The part that is matched by your employer is an automatic return. In addition to that is the return from the interest rates and tax savings.
In 401k plans, interest rates are compounded through tax savings and returns. So, by not funding your 401k plan you can lose a lot in retirement funds.
Some believe social security is automatic savings for retirement. It is not. It depends on the number of years you work and the amount you make working, with limits. A limit of 11 quarters is the minimum of working years to qualify for it. It is generally a low income, so the government asks that you consider it a supplemental income. This is why the 401k or IRA is important.
Pensions depend on where you work. Get all the information you need early if your job pays a pension at retirement.
If you have a small business, there are different types of retirement accounts you can fund on your own. When you file taxes, you pay into social security as a small business. At a minimum, you should fund an individual retirement account or IRA.
When there are no savings for retirement, this means you could be working into your 80s or 90s.
🍃🍃USE A SAVINGS GOAL CALCULATOR TO KEEP UP WITH ALL SAVINGS GOALS
How can you find out your best savings goals? Use my savings goal calculator at my calculator website.
Know your time limit, the desired interest rate, and your starting balance, then the amount added per month.
Find your desired interest rate by first looking at the rates your local bank has to offer. Look at passbook savings accounts, certificates of deposits, and money market accounts. All of these offer very low-interest rates with simple interest.
Go to various investment banks online and find out which index mutual funds pay the highest rates on a consistent basis.
🍃🍃SUMMARY OF PERSONAL FINANCE PLANNING
Personal finance planning starts with understanding the many ways of saving money. If you have no money, your planning goes backward fast.
What savings account you use makes a big difference. There are simple interest accounts that don’t pay much. But there are compounded interest accounts that could pay well over a few years to many years.
The savings account interest rate is based on the type of account you engage in. Study different types of accounts so you can get the best rates.
Savings vs. investment account; the biggest difference is the type of interest and time to get a return.
With savings, it is simple interest, but with investments, it is compounded interest.
A savings investment account pays well when interest is compounded, and the time is adequate for a return.
Savings for retirement can be done in many ways. These include a 401k, pension, social security,
and different types of Individual savings accounts. Social security should be used as a supplement and is not automatic. There are working time limits to qualify.
Use a savings goal calculator to determine the goals you need to have adequate savings.