ANSWERS: 1
  • There are many reasons you may wish to save money, such as a kid's college fund, retirement, medical funding or even a rainy day fund. There are also many ways to save money. Some are radical, while others are safer and require less of a risk.

    Globally Diversified Index Funds

    Globally diversified index funds are excellent for long-term growth and a safe way to save money. This includes the precious metal and commodity indexes. Investing in globally diversified index funds saves the investor from having to deal with inflation and currency fluctuations, which makes it an almost fool-proof way to save because the investor is not taking any risk. The down side to these types of funds is that the investor will not see much of a return on investment.

    Online Savings Accounts

    If you are starting with little money, an online savings account will pay a percent on your balance. The rates on these accounts will remain relatively high because the online banks limit the speed at which you can withdraw your funds. Normally, to access your funds, you must transfer them to another account, which could take days to finalize. While this is inconvenient, the point of the account is to build a savings, so this step deters you from withdrawing funds. There are usually no fees associated with these types of savings accounts, and they are usually protected by the FDIC, so there is no risk up to $100,000.

    Certificates of Deposit

    If you have a particular date that you need your money by, you may want to consider a certificate of deposit (CD). This is an especially good type of savings account for things like college and retirement funds. A certificate of deposit will guarantee a yield that is higher than most money fund rates in exchange for giving up access to the cash for a set amount of time, usually a few months to a few years. The key to investing in CDs is to invest in the short term. Since the fees for early withdrawal can be steep, it is easier to invest every 6 months and "roll over" your CDs regularly so you can access the money within a reasonable amount of time if you need it without incurring early withdrawal fees.

    Source:

    University of Minnesota: Investment Options

    University of Illinois: Certificates of Deposit (CDs)

    University of Idaho: Savings

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