Gaining control of your financial life is important for every earning individual. Most people stick to budgeting to gain control on their spending habits. This is necessary to get the best out of your earnings and savings. With budgeting you get to set aside something for your savings that can be used in the future, whether to buy a car or send the kids to college. This portion of your money can be that retirement money that you will be using on your golden years.
You know that you need to stash away something on that bank account. You even know the steps on how to open and maintain your account. But somehow you never get to understand the pros and cons of investing your money in banking institution.
For money safety, banks are the place to be. Your $100,000 and below savings are insured against loss by the federal government. This applies per depositor.
Certificate of deposit (CD) is a great deal. It offers guaranteed rates for your money with insurance up to $100,000 each. However, your money will have to be on your bank from three months up to five years or more depending on your choice of time frame. For increasing rates, you will still enjoy the lower rate that you applied with. If by luck the rate falls before your time frame concludes, the bank will have to adjust to the quoted rate.
Another advantage of banking is thru technology evolution: online banking. This minimizes the hassle of paying your monthly bills hence giving you more time for more important activities. You can also synchronize online banking with personal-finance management program like Microsoft Money or Quicken. This enables linking of your financial planning and banking account.
ATM on the other hand is the downside of the evolving technology, well, that is in terms of your budget. It takes a significant bite out of your savings. Although automated teller machine is convenient, it is increasingly pricey. There are bank charges every time you use another bankâ€™s teller machine.
You should also be aware of what is the right account to choose. Banks offer different types that fit your lifestyle. You have to consider when shopping for a bank your personal finances such as how much money you plan keeping at the bank, how many related banking services you want, and even how many checks you will write. If youâ€™re aware of your banking needs, you will be able to choose which bank is appropriate for your finances. Remember, banks offer perks but they will always have restrictions.
Aside from bank institutions, you can also save your money on non- banking institutions that acts like banks. You can choose from money market mutual funds, cash management accounts, and credit unions. These alternatives differ from the traditional bank in such a way that a mutual funds company offers higher yield than banks, while the cash management accounts consolidate the investment with the day-to-day cash flow, thus acting as a banker/brokerage account. On the other hand, credit unions acts like banks and deposits up to $100,000 are insured. But unlike banks, they are non-profit and member-owned cooperatives that return profits to members. They however have restricted access to ATM and have fewer bank services.
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