Start Your Savings Program With a Money Market Account

The recession has taught Americans that they need to save more. From building an emergency fund to accumulating a retirement nest egg, there are crucial long-term needs that demand spending less today in order to have more tomorrow. This kind of sustained saving is a long-term commitment, but opening a money market account can be a useful first step.

Whether you are just starting your career, or have just gotten control of debt enough to turn the corner toward thinking about savings, opening a money market account can be the ideal way to start accumulating money. The following will explain the special role money market accounts play, and give you some tips for where you might find the money to feed your account.

The Money Market Role -- Savings with Options

To understanding the money market role, start by thinking of checking and savings accounts as representing two extremes of sorts. A checking account gives you immediate access to your money, but in exchange for that access, you receive little or no interest. A savings account pays better interest, but restricts how often you can access the funds in that account.

A money market account falls between these two extremes. While not designed for everyday access (excessive transactions are likely to incur steep fees) like a checking account, a money market account does allow you more transactions than the typical savings account. At the same time, while money market rates are usually a little below savings account rates, they are significantly better than you would typically do in a checking account.

The special significance of this money market role for new savers is that people starting a savings program are often hesitant about locking their money up too soon. When a budget is new enough that there might be surprises, or when no cushion has been built up yet for emergencies, it is understandable to want to maintain ready access to your money. A money market account lets you retain a reasonable amount of access as a hedge against the unexpected, but lets you start down the path toward savings.

Feeding Your Money Market Account -- Ideas for Saving Money

Once that account is in place, how do you start feeding it? Here are some tips which will help you find extra dollars in your budget to funnel toward your money market account:

• Shop for auto insurance. Consumer Reports surveys indicate that the average person has been with the same insurance company for 15 years. Shopping around and negotiating can chop meaningful amounts off these bills.
• Eat smart. Saving money on food does not have to mean eating less. Bulk and discount buying helps. Also, the average American family spends 44% of its food budget on eating out--this should be a prime target for cutting back.
• Hold the phone. Households often have some redundancy between their land lines, cell phones, Internet providers, PDAs, and other services. Cut down to the minimum services that meet all your needs. Also, there is tremendous competition among telecommunication companies, with cable TV providers also getting into the act. Take advantage of this by shopping for the most competitively-priced package.

Finally, don't neglect to shop for the best money market rates, to make the most of your hard-won savings.

SoSources: 

Aug 01, 2008 • http://www.consumerreports.org • http://www.consumerreports.org/cro/money/personal-investing/saving-money/shop-smart-for-food/saving-money-shop-smart-for-food.htm

 

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