What You Should Know About Money Markets

June 22, 2010 By

With money market accounts, you can earn considerably more interest than you can with savings accounts. In order to afford to be able to guarantee the favorable rates associated with money market accounts though, banks impose high minimum balances, and strict limitations on the frequency of allowable withdrawals.

Where does you money go?

The rationale for the minimum balance, is that banks take your money and invest it on very conservative investments like government bonds, some securities and even in CDs, or other accounts with favorable interest rates. To do this, your bank needs for you to give some guarantee that your money is there for the long haul, and that you won’t just suddenly pull it out. That guarantee is your minimum balance.

The best rates on money market accounts are often from online banks such as Everbank. Some online banks even offer money market accounts with more lenient liquidity restrictions.

Rules for money market accounts

The typical limit for withdrawal from a money market account is six times per month. This includes automatic payments set up with you money market account, as well as electronic debits made with the debit card which is offered with some money market accounts.

There is such a thing as a high-yield money market account which earns even greater interest; however these require even higher minimum deposits, and are even more limited in terms of allowable withdrawals.

Earn more With Money Market Accounts

If you have a lot of idle cash, money market accounts are a much smarter investment than traditional savings accounts. Just make sure that when you do pick a money market account to invest in, that you take the time to find out what the best available interest rates are.

Filed Under: Investing

Retiring without Debt

June 22, 2010 By

Americans are up to their necks in debt, if not in over their heads. Americans are saving less and spending more than they make without regard for their financial well being after retirement. While you might be able to handle debt as long as you are young and working, what will happen once you retire and are on a fixed income? Chances are that the debts will severely affect your quality of life in the golden years. What is needed is a strategy to allow you to retire debt free.

The simplest solution is to not spend more than you earn. That’s likely easier said than done. But what we can do is avoid spending way above our means. Your finances need to be a lifelong strategy that puts you in a position of financial independence by the time you reach retirement age. Sure, that cabin on the beach is nice, but how does it affect your bottom line? Does it aid you in the long run or will it be a liability? This should be your thought process for each person.

Get rid of credit card debt as soon as possible. Many people carry steep balances their entire life and end up paying thousands of dollars in unnecessary fees. The money you give away to the credit card companies for quick gratification could possibly have paid off your mortgage. This is an absolute necessity.

A few years of extra income can make a huge difference in the bottom line. A job that you work even one weekend a month can provide you with thousands of dollars to invest in retirement savings. Find a part time job that you enjoy and stick that money away.

Start your retirement saving as soon as possible. Get rid of credit card debt and use the extra money to fund a 401K or IRA. The earlier you start the more time your money will have to work for you. When you’re young, put your money into a few risky investments. As you get older, begin to transfer the money into more secure types of investments. By the time you reach retirement age the majority of your investments should be in government bonds and CDs.

Retirement is the reward we give ourselves for a lifetime of work. Relaxation and our personal happiness should be the first priority. Worrying about money should be something left in the past. Make sure the things you are doing today are putting you in a position to enjoy your retirement.

Filed Under: Investing Tips

ETF’s Much Better then Savings Rates

June 22, 2010 By

Investors are constantly searching for the best interest rates. They often don’t realize that the best rates of return on their money can actually come from other investments and forms of earnings rather than standard interest rates. Exchange traded funds (ETF) are a great option that is easy, fairly safe and consistently outperform other types of investments.

An exchange traded fund is a set of stocks, bonds or both that are traded on the standard stock market. In essence they are mutual funds whose shares can be bought and sold like regular stocks. Since they operate as index funds, their earnings are directly linked to a specific performance index.

These funds first came into being in the early 90s. The first funds used the Standard and Poors 500 market index on which to base their holdings.

The next evolution saw the arrival of Qubes, which tracked the top 100 companies traded on the Nasdaq. These funds brought in a large number of investors due to the Nasdaqs performance during these years.

These days, all the biggest names in the mutual fund world including Vanguard, Barclays and other big players offer ETFs. There are ETFs that track every possible combination of indicators so finding one that fits your interests is easy. Funds are based off entire markets, individual sectors or any other set of factors one can come up with and justify.

ETFs are also available that are based on the foreign markets as well. These offer an excellent way to invest in emerging markets without as much risk as investing in individual stocks would entail.

ETFs are one of the best types of investments for those who want detailed professional control of investments, such as is offered by a mutual fund, but also want to be able to trade the individual shares as they see fit.

Filed Under: Investing