- Invest your money wisely --- save for the future.money, money, money image by easaab from Fotolia.com
Saving and investing your money wisely is essential, whether you make $10,000 a year or $100,000. No matter how much you make, if you fail to live within your means, you will always be living paycheck to paycheck. Learning to pay yourself first and put money aside for the future is an essential skill, as is paying careful attention to where you put those accumulated funds. - A money market fund keeps your funds liquid and allows you to access the money quickly when you need it, while providing a higher interest rate than you could get on a checking or savings account. A money market account is a good choice for an emergency fund, something that everyone should have. According to the Motley Fool website, three to six months' worth of living expenses is a good amount for your emergency fund. Keeping the cash in a money market fund lets you earn interest on it, while keeping the funds available should an unforeseen emergency, like a job loss or major expense, strikes.
- If you want to earn a higher rate of return without putting your money at risk, a certificate of deposit is a good choice. Certificates of deposit are insured up to $250,000 per account, provided the bank is a member of the FDIC. Before taking out a CD, be sure to check the bank's status at the FDIC website (see Resources). Also be sure to shop around for the best rate, since the interest rates on CDs can vary from bank to bank.
- Investing in the stock market can be a good way to build long-term wealth, but it is difficult to choose the right investments. One way to capture the overall return of the stock market at a low cost is to invest in an index mutual fund. While managed mutual funds attempt to time the market and beat the market averages by constantly buying and selling stocks, an index fund simply holds all the stocks in a given index like the Standard & Poor's 500. According to Money magazine, the vast majority of managed mutual funds fail to beat the index, and that makes index investing a wise choice.
- Saving money is the basis of all investing, so setting money aside in a savings account is a good way to start. If you have never been able to save money before, try directing 5 percent of each paycheck to a savings account. If your employer allows you split your direct deposit, direct that percentage right into the savings account. Look for a bank that pays competitive interest to make the most of your savings. Interest rates can vary quite a bit, so shop around at banks and credit unions in your area. After you get used to directing a part of your income to saving, you can slowly increase the percentage and force yourself to save more.
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