Free Checking Accounts Are Fairly Easy To Procure

Category: Finance, Financial Planning.

No wonder so many of us run from discussions on financial matters, and spend too, ignore our bills much money, as if in rebellion. Last year, the Employee Benefits Research Institute released the results of a study concluding that the majority of Americans are unprepared for retirement, are not saving enough for it, and have unrealistic expectations about how much they will need to live comfortably in their golden years.

It s scary out there. Texas is no exception. Being one of the millions in debt myself, I can understand this. With its high poverty rate, and even higher rate of those going without health insurance, it s lucky many can get through day- to- day life. The rising cost of housing, food. -- even clean drinking water- - can drive anyone with a limited income to distraction. As usual, knowledge and simple planning gave me hope. I decided to stop changing the television channel with every new disastrous financial report, and to start researching, when an investment counselor said to me with matter- of- fact conviction, "You know, young adults now just may need a million to retire. " After the initial( and expected) incredulous gasp, I decided gulping air wasn t going to do me much good.

Here are a few tips on digging yourself out of the panic. Most of us have at least one of them. Checking and Savings Accounts: The first step in building a sound financial future is practicing money management skills with both checking and savings accounts. Keeping track of their balances is an entirely different matter. At one point, it was common for financial institutions to charge monthly fees for the privilege of stashing money with them, but the banking industry rakes in so much profit from successfully luring their customers into other investments that it s just not necessary anymore. Free checking accounts are fairly easy to procure.

The theory is that if one has a free account with a particular financial institution, there s a good chance that person will return to that institution for other investments as his or her income grows- - investments that will make both the customer and the bank happy. Texas abounds with students- - students needing any freebies they can get- - so it shouldn t be difficult to find a bank offering free checking and savings accounts, especially in cities like Dallas, and Austin, Houston. By all means, take advantage of this. Look for a checking account without a minimum balance requirement, and one that doesn t, of course, charge monthly fees. Keep track of your balance. Free checking accounts are not usually interest- bearing, so put only enough money in it every month to cover your monthly bills, plus a little padding. The greatest risk with these accounts is the astronomical overdraft fees most of them charge.

The average APY( Annual Percentage Yield) on low- balance savings accounts hovers somewhere just around 5% , but at least it s something. Once all of your bills are paid at the end of each month, stash extra income in an interest- bearing savings account. Short to Middle- Term Investments: Once you feel you ve established a healthy pattern of money management- - no overdrafts, a properly balanced ledger, and all bills paid in full- - start looking into other investments. Money Market Accounts: Money market accounts are great investments at any age, but they re particularly advantageous for beginning investors simply because there are no penalties for withdrawing any amount at any time, no waiting period to continue investing( you can, deposit money at, likewise any time) , and the funding is usually only a check away. Most of the time, you ll need at least$ 5000 to invest in other types of accounts, at least initially, and, look for those with better APYs than your current savings account, but will not inflict penalties for withdrawing funds whenever you need them. There are several types of money market accounts, so be sure to investigate the minimum investment required, and restrictions on, interest rates each before making any commitments.

The result is a fluctuating interest rate that is almost always at least a few percentage points higher than that of a standard, low- balance savings account. Money markets work by pooling investments from thousands of contributors into an assortment of( usually short- term) funds from municipal bonds, to stocks. According to USA Today, non- bank money market funds are currently at about 5% APY. Interest rates are fixed, are usually comparable, rather than fluctuating to money market accounts and can be purchased at a bank or other financial institution, including many sites online, for terms as short as three months. Certificate of Deposit: Certificates of Deposit, or" CDs" have been around longer than the replacement for the tape cassette. Of course, the longer the term you lock in, the higher the rate you will obtain under most market conditions In other words, whatever interest rate you lock in at the beginning will remain the same throughout the course of the investment.

The primary disadvantage of CDs lies in the substantial penalties inflicted if the investor withdraws his or her money before the allotted time. Once you ve invested in a CD, you cannot continue, however adding to the same one during the life of that investment, until renewal- - which is one reason you may want to go with a shorter term. The average APY for a six- month CD is currently 59% ; for a one- year CD, 77% ; for a five- year CD, 96% , although some banks may offer better deals. Health Savings Account: Health Savings Accounts, or HSAs were created by a 2003 Medicare bill, without a doubt, and are, worthy of consideration for many individuals and families. CDs are a good idea if their current APYs are higher than contemporary money market accounts, and you don t expect to- - or perhaps don t trust yourself to- - handle the money for a while. HSAs strive to address the growing problem of underinsured Americans( Texas knows this well, with over 25% of its population going without any insurance) by allowing investors to save for qualified medical expenses and future retirement health expenses, on a tax- free basis.

HSAs provide incentives for saving towards healthcare, and a bit of financial padding in case of disaster. These accounts are only made available to those with qualifying high- deductible health insurance policies, and are a great choice for many young, middle- class Americans. The major disadvantage is that penalties are inflicted if the money is withdrawn for unqualified expenses prior to the age of 6 Retirement Accounts: The types of retirement accounts available to Americans are too numerous to mention, and are highly dependent on employers in most cases. The first, and most important thing to do, is to check with your employer to see if, retirement plans are, or what offered. Entire sections of libraries and many websites are dedicated to this subject. Some companies offer employee benefits, including flexible 401( k) plans and matching funds. However, rather than briefly attempting to delve into the plethora of accounts that may, be available to, possibly you, this article will focus on an account available to all, regardless of employer. -- the Roth IRA account- which has become increasingly popular since becoming law in 1997.

Look seriously into these options. Now, IRAs have been around for some time, but traditional IRA accounts require funds going in, to be taxed, and coming out. Considering that IRA interest rates are compounded, this could( and is intended to) add up to quite a bit over several decades. This means that whatever dividends or proceeds an investor earns over the years will be taxed upon withdrawal. Roth IRA accounts, on the other hand, do not tax funds upon withdrawal. A Traditional IRA, on the other hand, is not taxed going in, but is subject to tax coming out, at whatever rate of income will apply to you at that time- - the assumption being that you will withdraw most of this money during retirement, when you will not have other earned income driving up your tax rate, .

Funds invested into the account are considered taxable income going in, but the compounded interest or proceeds can accumulate tax free, until the age of 59 1/ 2, at which point they can be withdrawn without penalty or taxes. This means that whatever your Roth IRA account balance statement is, is the amount you have for retirement, free and clear. If an investor begins an IRA account in his or her twenties, and contributes a modest amount every month( possibly matched by an employer) , principle and compounded interest could conceivably yield a million or more dollars over four decades. No more taxes. The way to think of a Roth IRA, as opposed to a Traditional IRA, is that you are paying taxes on the seeds instead of on the crop. Maybe retirement is possible.

Now, that s something to think about. See, that wasn t so hard. There s a good chance you re missing something you have the funding for- - right now, sitting in a no- , or low- , interest- bearing account. Respect yourself( and your anxiety levels) enough to seriously investigate financial opportunities. If you have any kind of steady income, financial security should be within your grasp. Just take a deep breath, and start acting, open your bills like the adult you always dreaded you d have to be someday.

A comfortable retirement is in your future. Taking care of your financial responsibilities can have a positive effect on your anxiety levels, and overall health, sense of security. Being aware of your health, and what you can do to safeguard it, will certainly affect you as you age, and eventually your wallet as well.