- One of the most important things every saver and investor needs to do is determine what each part of his or her portfolio will be used for. Every worker needs to have an emergency fund in place -- a fund that can be used in case of a job loss, unexpected expense or other financial shock. This emergency fund should consist of at least six months' worth of living expenses, and perhaps as much as 12 months or more. If that seems excessive just consider that for every $10,000 worth of income it will generally take a month to find a new job, meaning that if you make $50,000 and lose your job you will likely be looking at a minimum five month long job search.
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If you are lucky enough to have an emergency fund in place your next step is to make the most of that money. Parking money in an emergency fund is important, but it is just as important to get the greatest return on the funds invested. Not only will a good interest rate reduce the amount of your own money you need to put in, but it will also give you an extra cushion of cash if you need it.
These days interest rates on savings accounts can be nearly nonexistent, often in the 0.10% to 0.25% range. At that rate it would take a very long time to earn even a few dollars worth of interest, so it is definitely worth your while to look for a higher return. -
When it comes to looking for a higher return the internet is definitely your friend. There are excellent resources to help savers and investors get the most for their money, so it definitely pays to check rates online. One of the best places to start is Bankrate.com, a comparison site that lists the highest interest rates available for money market accounts, savings accounts, certificates of deposit and more. This site provides excellent information -- no matter how much or how little you have to save.
Online banks can also be sources of excellent interest rates, often much higher than traditional banks. There are a number of reasons for this discrepancy, including the fact that online banks do not have the high overhead costs of brick and mortar institutions. Of course it is important that you be comfortable dealing with an online only institution, and it is absolutely essential that the bank you are considering be fully FDIC insured. You can head over to FDIC.gov to check the coverage status of any online bank you are considering. Getting a great rate on your savings is not as easy as it used to be, but there are some good resources out there to help you get started. When you are armed with this information you can get the most for your money and help your savings grow.
