Be a Smart Saver

	Smart Move
	The longer your money earns compound interest, the more remarkable the results, so the key is to start early.

Saving is the foundation of a personal financial plan. Money you save can be used to pay for unexpected expenses or a planned purchase in the near future. It’s money to keep safe—and readily available. Three of the most common savings choices are bank savings accounts, credit union savings accounts, and money market accounts. The key advantages of these types of accounts are:

• Low minimum deposits



• Considered among the safest places to store money



• Earn a guaranteed rate of interest



• Can be government insured



• Usually easy to withdraw money when you need it

The Magic of Compounding Can Make Small Savers Into Millionaires

Young military families seldom have a lot of extra money, but here’s good news: You don’t have to save a lot today in order to have a lot in the future—thanks to compound interest. Compounding pays interest on both the amount you save and the interest you earn.

The longer your money earns compound interest, the more remarkable the results, so the key is to start early. Let’s look at how much money two 21-year-olds could accumulate for their retirement. William starts investing at age 21, and puts $3,000 a year in an IRA that earns 8 percent compound interest every year. Cheryl waits seven years longer and then begins to invest the same way. By age 64, William will be a millionaire, with almost twice as much money as Cheryl—even though he only invested $21,000 more.

The Magic Of Compounding

See how much you can save, using the easy savings calculator on SaveAndInvest.org. Enter the following information into the calculator:

• The amount of your opening deposit



• Your estimated annual yield, which is the rate your money will earn over a year, compounded annually (5 to 8 percent is a realistic estimate)



• Your idea of an inflation rate (the inflation rate was in the general 2 to 4 percent range between 2000 and mid-2007)



• The amount and number of deposits you could make over a period of time

The calculator will show you quickly—and exactly—the amount of money you could have at the end of that time given the estimated annual yield and inflation rate.

Get to Your Money When You Need It Without Paying Penalties

Bank and credit union savings accounts make it easy to take money out when you need it, so these can be good places to put money you might need in a hurry. Money market accounts at banks may limit the number of times you can take money out. Taking money out of these types of accounts may trigger fees for falling below a minimum balance, so check on required minimums before making withdrawals. You may want to change account types to avoid these charges.

Other types of accounts charge penalties or fees for making withdrawals, or take days or weeks to get your money to you. These include retirement savings accounts. Taking money out of a retirement account before you are close to retirement age can cost you in taxes, too. Before putting money into any type of account, ask:

• Are there limits on the number of withdrawals I can make? How many can I make and over what time period?



• Will there be costs to make a withdrawal? What are they and how can they be avoided?



• How long it will take to get money from the account?



• Will I have to pay taxes on money I withdraw from the account?

Look for These Signs of Safety If protecting your money is your number one goal, look for: Federal Deposit Insurance Corporation (FDIC) insured banks National Credit Union Association (NCUA) insured credit unions If the bank or credit union goes out of business, the FDIC or NCUA will give you back the money you had on deposit, generally up to $100,000 in one or more accounts. The FDIC and NCUA do not insure the money you invest in stocks, bonds, mutual funds, life insurance policies, annuities, treasury securities or municipal bonds, even if you purchased these products from an insured institution.