How to Get the Best Interest Rate on Your Available Savings
Don't let your money sit around idle. Give it a total workout. Here's how to get the best interest rate on your available savings by deciding whether or not a savings account should be kept in the bank or used to pay down high interest debt.
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Things You'll Need
- Good hard look at your finances
- Creative thinking
- Patience
- Internet
- Phone
- Financial articles from newspapers and magazines
Instructions
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Take Care of Abe and George
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Before you can start a savings plan, you have to show yourself the money. It's not all about the Benjamins, it's about the Abrahams and Georges. Take a good hard look at your family finances. Have each member of the family keep a spending log for two weeks. Write down every purchase, including lunches, gas for the car, the double mocha latte you picked up on the way home from work, and the roses you ordered for your wife.
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Call a family meeting. Explain that it is important for everyone to be involved in the family's financial health. Kids who participate in family financial matters grow up to be wiser investors, save more, and stay out of debt better than their peers. This is the single most loving gift you will ever give your children. Do not wait until a financial crisis occurs to involve the entire family in financial health.
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3
Using everyone's spending diary, make a budget. Do not adjust the figures yet. It is important for everyone to see how much money is being spent and what it is being spent on. Do not criticize anyone's spending choices at this point. This is just a starting point for a new financially healthy outlook toward money.
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Have each family member look at their spending and make a note next to each item what need that spending met. Discuss what wants or needs they had to put aside to get the items they chose instead. Ask them if they are happy with their choices. Again, be careful at this point not to criticize. Just encourage discussion.
Brainstorm
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Call another family meeting. Have everyone bring their spending logs. One item at a time, have everyone think of alternatives they could have chosen, especially if they are less expensive. Be sure that the alternatives fit the same need that was listed in the initial spending log. Examples might be packing lunch instead of buying; walking instead of taking a cab or riding the bus; car pooling instead of driving alone; buying your favorite brand of coffee and making it at home instead of buying it at a cafe. Make sure everyone writes two or three alternative ideas next to each item on their list.
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Make a challenge: the person who has the largest cost savings on the next two weeks' spending gets a matching amount to start a savings account. Play fair, though. Be sure to make or buy things in the same categories as the previous spending log. The idea at this point is to encourage creative thinking about spending choices. Genuine reduction will come later.
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Come together for a third meeting in two weeks. Praise everyone for any savings they made in their spending. Be sure to reward the most frugal spender.
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This time around, challenge the family to find free alternatives for every item on their list. In other words, if they bought a gift, ask them to brainstorm things they could have done that would only cost time and effort rather than money. If they use gasoline for the car, challenge them to ride a bike, walk, take the bus, or carpool.
Shop Around
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Assign each family member to call a bank and ask about rates for savings accounts. Ask about minimum opening deposits, minimum balances, penalties for early withdrawal, and interest rates.
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Assign each family member to read one or more financial articles and take note of any points that they found important. Ask them to also note things they do not understand. List the topics each family member does not understand and help them learn more about the topic.
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Sit down together and discuss the family's monthly expenses: house payment or rent, car payment, car insurance, home owner's insurance, utilities, food, medical care, credit cards, student loans and miscellaneous expenses. Discuss interest rates and how they affect payments. List debts in order according to interest rate.
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Discuss with the family whether or not interest rates on debt are greater than any interest you could gain in savings or investment. If interest rates on debt exceed interest rates on savings, pay down debt first, beginning with the bill with the highest rate, not the highest balance. If they are not, begin a savings plan. Match spending reductions with equal funds to invest or save. Soon, your family will be paying off debt, lowering spending, and getting a jump start on their future with savings and investments.
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Tips & Warnings
Use the spending log to make a budget. Do not adjust any figures yet.
Ask each family member to note what need each spending item on their list met for them.
Discuss whether or not each family member is happy with their spending choices.
Resources
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Comments
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Laura Chapman
Jun 09, 2008
I like these ideas. It is always very important for the whole family to be involved in financial matters. Teaching me about finances is definitely one of the best things my mother ever did for me. As far as savings accounts go, don't forget about electronic options such as ING Direct's Orange Savings account.
