Expert Savings Advice

It used to be that you worked hard, burned your mortgage and burned the papers in the front yard and partied. That doesn’t happen too much these days.

Very few people stay in their home long enough today to pay off a 30-year mortgage. If you can pay it off early, it might be the best way to spend your money.

There is a security found in owning your own home. With every year that passes, we count how many years until the place is free and clear. You can make extra payments on your mortgage to pay it off quicker and save thousands of dollars in interest. For example, paying one extra payment a year on a $200,000 mortgage, you can save over $65,000.

That’s a lot of money that you could spend elsewhere.

There are a lot of arguments against paying off your mortgage early. Long-term mortgage rates are around 7% for most homeowners. If you deduct the interest paid from your taxes, the actual rate you are paying is closer to 5.1% if you are in the 27% bracket. Any investments that earn more than 5.1% are a better place for your money.

Many advisors recommend that you take care of three areas of investment before using your extra money to pay off your mortgage:

Retirement

You may need to focus your extra money towards your retirement before you pay off your home. Owning your own home won’t mean a thing if you have to sell it to afford medication and food. Saving for retirement should especially be important if your mortgage is scheduled to be paid off before you retire anyway.

Insurance

If you have others dependant on you, good insurance coverage is necessary. Your family’s needs should be addressed by you policy. Make sure that you have enough coverage to take care of your family. Disability insurance is expensive, but a good idea. If you are unable to work for a long period of time, it takes away a lot of your worries by providing an income.

Emergency fund

Having enough money in a savings account to cover three to six months worth of expenses, including your mortgage payment. This will help prepare you for any emergencies that might come your way. For example, if you break your arm and cannot work for two months, your loss of income will be covered by your emergency fund. On the smaller side, a broken dishwasher or vehicle won’t stress you out as much if there is money designated for repairs.

And don’t even think about paying off your mortgage if you have high-interest debt somewhere else. Always pay off your credit cards first. Extra money goes to the loans with the highest interest first as a general rule of thumb.

There are some homeowners who really benefit from paying off their mortgages early. If you have a small mortgage and don’t deduct your mortgage interest, the actual cost of your mortgage is higher. Paying off your mortgage is a good idea.

If you are paying private mortgage insurance because you owe more than 80% of the home’s value, you should pay it down as quickly as possible. Eliminating your PMI payments will reduce your monthly payments and gives you a faster return on your investment.

Many lenders will encourage the payment of a mortgage early. On my first home mortgage, our mortgage company offered a program that deducted the payments from our checking account twice a month. Each payment was half of the regular payment. Because there are 26 bi-weekly periods a year, you are making an extra payment during the year. If you are paid bi-weekly, the situation can really help you in your budgeting as well.

Programs such as these are convenient and free. Another way to do this is to take your monthly mortgage payment and divide it by twelve. Add that amount to each payment you make, and you will be making one extra payment each year. This will shave years off of your mortgage.

Make sure that the extra payment amounts are applied to the principal of your mortgage. Make sure that your agreement contains no prepayment penalties. Most won’t.

I am proud of you if you are in a place where you can pay off your mortgage early. The idea of not having a mortgage payment is a wonderful one. Look at where you are, where you are going and how you will get there before you decide where your money will be going.

I have already written about the financial necessity of saving a portion of any income payment that you receive. This means that a percentage of every single source of income is set aside, marked, or tracked as money that you cannot spend. This task isnt optional if you want to have some basic financial stability or start growing some serious wealth. Saving is the first step and it is the easiest, simplest, but the most emotionally difficult step. I know that starting to save money is emotionally painful because spending money is easy and pleasurable, while saving money feels difficult and challenging. But like any behavior, it becomes easier and natural the more you do it.

As a review, the billionaire John Templeton started out working during the Great Depression but he saved 50% of his income. This guy was serious! OK, you may have a lot of fixed expenses that you just cant cancel immediately, but at least enroll in financial nursery school by saving 1% from all the income that you receive. Or start with only $3 a month and then ratchet up your savings rate continually until you are at least over 10%; or if you are ambitious get it over 30%. (If you are trying to find the loophole, this savings is your after-tax income that you can spend dont count your 401K or medical savings accounts or any other qualified money that you dont have full/immediate access to spending).

The remainder of this article is about what to do with that savings. Economics is the study of allocating scarce resources. Personal economics are similar, but I think that it is better described as: The allocation of your income that you cant spend. If you dont spend this money, and maybe have it setting aside in savings account, what do you do with it? Do you pay down on a credit card, save it for a car, donate it to a worthy cause, or purchase a bank certificate of deposit? How do you go about deciding?

Well, I have given this some thought and have reached a few conclusions. It is my view that your monthly savings needs to be divided among four mandatory categories. By this, I mean that among the zillions of things you can do with savings, it is my view that four of them are absolutely mandatory. For example, if you earn a paycheck (and after all of the taxing authorities take their share) of $1,000 that you can deposit into your checking account and youve chosen a personal savings percentage rate of 8%, then you move $80 ($1,000 X .08) into a separate savings account. Now, you will take this $80 and divide it up into at least the four mandatory categories I am going to discuss, along with any other categories that you value. In this way youll have the whole $80 assigned to specific financial duties to meet your financial goals.

Here are the four categories in priority order:

1. The Vault this is your wealth account. Money gets deposited into this account and it never leaves, like a one-way valve. The Vault is invested and the principal is never spent. It will grow into the largest part of your net worth, generating nearly all of your investment income. If you dont start creating wealth penny-by-penny, youll never have any.

2. Soft Savings a delayed spending account. This money is marked for things that you want to buy, but cant afford to purchase with normal pocket money. For example, a house, car, boat, vacation, college fund for kids, planned medical care, clothing, jewelry, etc. But this also includes maintenance to your home, like a roof, new appliances, new siding, paint, landscaping, remodeling, etc.

3. Paydown Debt Balances making extra principal payments on your credit cards, car loans, and your mortgage. By chipping away at these expenses you will eventually eliminate them all, and then have more money available for other categories. Personal debt is the opposite of financial freedom and dramatically makes it more difficult to reach your financial goals. If you doubt this, look at the interest charges you pay each month and imagine if that money had been invested instead.

4. Financial Education books, magazines, newsletters, seminars, software, investment memberships. Also, hiring professional financial advisors, tax accountants, estate attorneys, etc. (Avoid free advice a buddy, your cousin, or a friends neighbor buy the best, most expensive professional advice you can afford).

As I mentioned before, you can put your savings into places that are only limited by your creativity. But it is my view that these four areas are so important that they need to be continually fed money in a systematic manner.

If you are missing the first account, The Vault, youll never have the money to start investing so youll never receive any investment income. This is pretty much the goal of all personal finance, to help you generate the most investment income. That is why this is the most important of the four categories, to get your money earning money so that you dont have to. (I do not consider any retirement accounts or qualified accounts to be Vault money. This is because you do not have direct control to invest the money or receive any investment income until the government decides that you can).

If you are missing the second account, Soft Savings, you either cant buy what you want, or you have to increase your personal debt. This is moving in the opposite direction of financial freedom you are reducing the amount of money that you can spend each month by the amount of the debt payment, and you are reducing your net worth by the principal and interest that youll be charged. Another symptom of a lack of Soft Savings is disrepair to your car, home, and health because you dont have the money for upkeep. Everything physical needs to be maintained, from your teeth to your vacuum, and it costs money to do so. This depreciates the financial assets that you own, and puts at risk the most important quality of life your health.

If you are missing the third account, Paydown Debt Balances, you are simply going to be the patsy in the financial game of life. People that are building their wealth collect lots of little interest payments from the people that are destroying their wealth by making lots of little interest payments money is transferred every month from one group of people to the other. Which group do you want to be in? Well, your Vault can automatically put you into the group of wealth-builders and your Paydown Debt account starts to extract you from the group of wealth-destroyers. The Paydown Debt account puts you on track to permanently extinguish all of your personal debt. The sooner a personal debt is paid off, the more rapidly you can take all of this money and put it into the other categories.

If you are missing the fourth account, Financial Education, you wont know how to captain your Vault, and you may run it straight into the rocks. Only you will manage your money in a manner that will be to your maximum benefit. So it is best if you pay to learn how to handle money and learn where to put it. But not everyone has an interest in these subjects, and that is fine. For them, instead of personally managing your money, you are going to personally manage your financial advisors. Youll be spending money and time to hire and manage the advisors to attend to financial details.

By allocating your savings into these four categories you are addressing the four most important elements of financial management. Youll be making certain that: Your investment income will always increase by adding to your Vault; youll have money available for extra expenses with your Soft Savings; your net worth will always be increasing with a Paydown Debt account; and youll intelligently learn how to lower your investment risk, raise your investment returns, and lower your tax liability with your Financial Education account. The only source of money to build these critical financial functions to increase your income, net worth, and stability is your savings you simply have to do it.

I recommend you fund these accounts simultaneously do not focus only on debt or only on education because I have seen how it is financially detrimental to do so. For example, lets say that you really want to paydown your debt so you dont contribute anything to The Vault. I have found that if you dont have any investments, your investing skills will be under developed. You will not know how to invest once your debts have been paid off, youll have no investment income to manage, you wont be looking for investing opportunities because that is something you cant afford right now, etc. And as a result, it will be harder to get into the investing game later, youll have more to learn in a shorter amount of time, and may just avoid it altogether and put Vault money into a low paying account.

How much do you allocate among the four categories? Anything more that zero! It is up to you, and your financial situation will fluctuate and be different from others. Just to get some starting percentages, below is my allocation. It is not a recommendation for anyone, it is just what works for me right now.

My current savings rate = 20% of all after-tax income.

(This does not include 401K, medical savings accounts, or other deferred/qualified withholding). This means that 20% of all cash income that hits my checking account each month is set aside into these categories:

1. The Vault receives 50% of total savings each month.
2. Soft Savings receives 20% of savings each month.
3. Paydown Debt receives 20% of savings each month.
4. Financial Education receives 5% of savings each month.
5. And that leaves 5% for other categories each month.

You may receive continual, ongoing income, in addition to some rare, one-time inflows of money. The percentages detailed above are how I allocate regular income savings. But if there is any one-time inflow of money (garage sale, bonus, extra project), then I take 90% of the proceeds and split it among the four accounts, and the other 10% is just spent. You can create your own money rules for different types of income; you can tell by my allocation percentages that my primary focus is to build up the balance of the Vault.

The amount of money that you can save from every source of income is your key to a brighter financial future. Contrarily, a risky and dimmer financial future awaits those that refuse to systematically save money. So be sure that you take the steps necessary to set savings aside and then simultaneously divide it among the four mandatory accounts by consistently allocating money to them. You dont have a financial foundation without these four accounts, but with them, you can build as high as your ambition takes you.

The Woeful Inadequacies of Traditional Estate Planning: The Four Critical Questions You Need To Ask Yourself

When I mention the words, estate planning, most people think of meeting with an attorney and drafting legal documents. Traditionally, those documents include a will, durable power of attorney, health care proxy and perhaps a trust. After you draft these documents, you meet to sign them, then you put them somewhere safe, cut a check to the attorney and breathe a sigh of relief because you finally have things covered. All is well and your estate is perfectly in order, right? WRONG!

Too often the drafting of legal documents is confused with developing an estate plan. Sure, legal documents are part of an estate plan, but they are not the estate plan. You need to make sure that you have everything in one spot. If not, you could cause yourself some real problems. Thats why 98% of all estate plans fall short. Thats why you have debacles like the Terry Schiavo case and the Ted Williams dispute. In order to make sure that these sort of things dont happen to you, you have to have a plan. Most people plan out what should happen in the event of their deaths. What if you are disabled or mentally incapacitated? Effective estate plans must be drafted in order to account for these kinds of contingencies.

If you wish to have an effective estate plan, you must answer four extremely critical questions:

1. What documents do I need?

You need a will, durable power of attorney, and health care proxy. Additionally, you need an original marriage certificate, military discharge paperwork, health and life insurance information, beneficiary designation forms, deeds, and appraisals. Another necessity you need to have is a listing of important contacts with telephone numbers.

2. How will my beneficiaries find these documents?

We all have our own personal and unique filing system that has worked well for us over the years. Thats fine. You should use your own unique filing system, whatever works for you. However, you do need to create a system that unlocks your personal filing system. For example, if something ever happened to you, how would your beneficiaries even know you had a safety deposit box, let alone the location of the bank or key?

3. Who should have access to these documents and when?

I know thats actually two questions camouflaged as one. Remember, these documents are personal and confidential. Today, we are all too aware of the very real threat of identity theft. Safeguarding these documents and making them available, under specific circumstances, to a select group of individuals will allow you to protect your privacy while still preparing an effective estate plan.

4. Who will best advise my beneficiaries?

Your estate plan needs to address not only your financial assets, but also your dreams, wishes, and values. You need to designate that one person who can capture all these characteristics of your life, someone with whom you have shared those most personal thoughts. At you or your beneficiaries time of need, who should be that one call?

Dont confuse proper estate planning with simply drafting the needed documents or purchasing an insurance policy or special investment product. An effective estate plan can only be accomplished with a well thought out approach that is designed to protect your most important information and guide your heirs. Only then will you have peace of mind in knowing that youve done your best for your loved ones and nothing important will be overlooked.

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For a review copy of the book or to set up an interview with Mark H. Kaizerman for a story, please contact Jay Wilke at 727-443-7115, ext. 223 or at jayw@event-management.com.

Your net worth equals what you own minus what you owe. It is commonly referred to as the difference between your total assets and your total liabilities.

Heres a simple illustration:

Home Value = $350,000   Mortgage balance = $150,000
Investments = 100,000     Credit cards = 20,000
Auto = 45,000                  Auto loans = 30,000
Savings = 15,000             Bank loan = 4,000
You Own = $510,000        You Owe = $204,000

Therefore, your net worth would be $306,000.

There are two ways to increase your net worth. You can own more things or you can reduce your debt obligation. This article will focus on reducing your debt first because it is the fastest way to generate more money and, then, buy (own) more things.

In our example, you have $204,000 of debt. If youre like most people, you pay less attention to the mortgage and car loan balances because you consider them to be rather normal (necessary) to your way of life.

The credit card companies are probably charging somewhere between 12 to 18 percent (forget those slick, short-lived introductory teasers) and the bank loan is probably around 6 percent.

Now, before we go further let me ask you a question. Which is faster? Create $204,000 (in other words, own more) … or reduce $204,000 of debt? In both instances, the result is the same because your net worth will have increased by the same amount.

To create $204,000 in 15 years, you would have to invest $6,956.69 each year for 15 years and receive a guaranteed 8 percent rate of return. Where can you find a guaranteed rate of return this high in todays marketplace? No where!

To reduce $204,000 of debt in 13.5 years, it takes only $100 extra each month. Now, lets make sure you understand what I just said.

To increase your net worth by $204,000 you must invest almost $7,000 each year for 15 years. You hope and pray youll receive no less than 8 percent average every year.

Or… you can come up with only $100 each month to reduce 100% of your debt (to include your mortgage) in only 13.5 years — guaranteed! Hard to believe isnt it?

Go ahead and check it out yourself. First, use a compound interest table to compute the investment requirement. Then, print this
debt reduction chart. Youll need an Adobe Reader, which is probably already installed on your computer. Otherwise, go to adobe.com for a free download version.

In every instance, it is faster and more reliable to eliminate your liabilities than to increase your assets. Why? Because the interest you pay on your debt is excessively higher than the guaranteed interest you can earn.

By following the debt chart and adding an additional $100 each month to the minimum payment requirement, you can dramatically compound the effect of your payments and expedite the complete elimination of all your debt.

Its a lot easier to come up with $100 extra each month than it is to find $6,956.69 each and every year for the next 15 years.

It is becoming increasingly popular to use a mortgage in lieu of a low-interest savings account. Is this a good idea?

The latest version is a home-equity line of credit that is used to buy a home. It is marketed as a way to pay down your mortgage faster than the traditional mortgage. But it only works at this if you use it correctly. It could be both good and bad that you can use the funds from the account whenever you want to. All you have to do is write a check.

It is basically an adjustable-rate home-equity credit line that is based on the value of the property. You make interest-only payments for the first 10 years. The balance is then fully amortized over the next 20 years. You will pay both the interest and the principal at this time.

If you go ahead and own the home for ten years, you could be facing amazing monthly payments. Your monthly payment could more than double on you. Yet, there is no negative amortization on this loan program. The interest is capped for five years and high-credit score borrowers are currently looking at a cap of 8% over the starting rate. In today’s world, the maximum the interest rate could hit is in the 14% range. Yet, after five years, the cap could revert to either 21% of the state’s usury.

This plan could work well for the dedicated purchaser who puts all extra money and bonuses into the mortgage account as payment on the balance. The interest is then lowered and the loan is paid off much faster. Most borrowers must have a score of over 660 to be approved.

Many advisors suggest the use of a 30-year fixed-rate mortgage with interest-only payments for the first ten years instead. Yes, the payment will go up after the inital ten years, but the interest rate won’t. The concern against the equity-line to purchase is that borrowers would simply write checks without thinking about the addition to their mortgage balance. Plus, the interest rate is adjustable — always a risk.

If you are considering an alternative loan program for the purchase of your home it is important that you sit down and do all of the necessary math. For example, you should calculate how high the payment could go due to rising interest rates on an adjustable rate mortgage. You should be able to afford the worst. If you can’t, you probably should look to a less expensive home.

If you only plan on living in a home for three to five years, a loan in which the interest is fixed for five years is perfect for you. You get the lower rate, but you have to be sure that you are going to want to move in the time period. It still remains that the best long-term bet for a mortgage is the 15-year fixed rate mortgage. You pay less interest and build equity faster.

Other new trends to watch for in the marketplace include mortgages that can be automatically converted into reverse mortgages and longer fixed-rate term mortgages.

Wanna know the best advice ever you can get about money?

Here it is…

Let’s say that you are getting regular monthly salary from work and you are happy with it. Now, at the end of the month (and most of the time, two days after you get your paychecks), you wonder where all your money is gone.

You begin reasoning.

30% of it goes to house mortgage.
20% of it goes to car payment.
10% of it goes to credit card payment.
5% of it goes to utility bills.
etc, etc, etc…

“That should be fine. I’ve got all taken care of. Next month, I’ll get another paycheck and the same cycle goes on and on… enough for me to survive the whole life.”

Well, you gotta be careful now.

What happens if your car broke down?
What happens if your kitchen needed renovation after a heavy storm last night?
What happens if you suddenly forgot that you’ve overspent your credit card?
What happens if you fell sick?

Things could be worse, and now is the time that the cliche “Fix your roof on a sunny day” is very much true to you.

You don’t want this to happen to you, right?

There could be thousands of things that could go wrong in our lives but unless we realize that we need to prepare for the worse, we’ll never get ahead of ourselves.

Sometimes, fixed salary could be a good thing for you because you can plan with what you want to do with your money on a predicatble basis. Though I strongly believe that you still need a secondary income – preferably a recurring secondary income – to improve your financial situation at any level.

And, the best plan to improving your financial situation is…

PAY YOURSELF FIRST.

That’s right!

Regardless if you have $300,000 of house mortgage or a $100,000 savings in the bank, make it a habit to pay yourself right after you get your monthly paychecks. This habit will definitely help.

Let’s see…

You’ve been paying everybody you owe every month. You pay the bills, the banks, the mechanics, the who knows who and you actually get nothing, except settling the scores.

There’s just another person that you forget to pay – that is YOU.

Imagine yourself as a bill collector on yourself. No matter what, you have to pay yourself at the beginning of every month (I suggest 10% of your salary. The more is better) – or else you cease to function as yourself.

Never fail to pay your SELF and only after you pay yourself, then you pay the others.

Hard?

Yes, at first, but once you put the action of “Paying Yourself First” into habit, you’ll actually enjoy doing it, knowing that you do good deeds to yourself.

Try it once. Then do it the second month. And then, another… and another.

PAY YOURSELF FIRST because you deserve much more than the other bill collectors.

If you are looking for a way to save money, but always find yourself dipping into your funds, try opening up more than one account at your bank.

By having more than one account you will be able to keep your money separated, which will help you avoid spending cash that you should not be touching. Of course this can all be done with one account and some self control, but it is not always that easy. By having an account for many different reasons, you will be able to keep your money separated, and only withdraw funds from the appropriate account.

The first account that you will want to set up is a savings account. You should put money into this account and never touch it unless you are in an absolute emergency. Savings accounts will also earn you interest depending on how much money you keep in the account. This will give you an incentive to keep as much money as possible in your account.

Next, you will want to have a checking account that you can use to pay any bills that you may have. This way, you will know exactly how much money you have available each month for your bills. By having a checking account you will also ensure yourself of never having to go into your savings to pay bills.

Also, many people have found it to be very beneficial to start a personal account where they keep money that they only use for leisure. By doing this, you will be able to keep track of how much money you spend on things outside of bills. This will also help you to learn to budget your money more efficiently.

You can also open a separate account for any special items that you are saving for. If you want to take a dream vacation, why not open an account for this? Then you will be able to put a certain amount of money into the account every month in order to reach your goal. Many people overlook this type of account, but it offers many benefits and advantages.

Overall, having a number of different bank accounts is a great idea. This will allow you to easily control your spending and saving. You should open as many accounts as you need in order to keep your finances organized. By doing this you will soon find out that you are more organized than ever before.

Too often we get caught up in our lives to worry about finances. The problem is that finances are in many cases why our lives are so hectic. This phenomenon is all too common. I say “we” because I face the very same difficulties – even though I am a financial advisor.

I like most people would like to live a life where someone else did the things around the house and at the office that I don’t want to do, I would like to be able to spend time at an emotionally meaningful and challenging profession, I would like to spend time with my wife and kids, and I would like some down time to do whatever I opt to do.

Given these financial goals I often wonder what I (and my clients) are doing to work towards those goals. I (and most of my clients) spend a lot of time around the house and office doing things I (we) don’t want to do. I find excuses for not hiring someone to do those things.

Instead of focusing my energies at work on things that are emotionally meaningful (such as stewarding money towards charitable causes) and challenging (such as structuring complex partnership agreements), I tend to spend my days pushing paperwork and setting up accounts. Yet, I have spent very little time thinking about how to remedy this situation. When I start thinking about these issues, I often make excuses (such as “if I want it done right, I have to do it myself”).

I spend a lot of hours in the office and even when I am at home I end up doing tasks that are away from my wife and children (such as mowing the lawn or repairing a leaky faucet). I could easily hire this type of work out, but somehow I always end up just doing it myself.

I have a lot of interests, such as coaching my son’s soccer team, reading classic literature (especially 18th century thrillers), and restoring old run down Volvos. Other than the coaching, I never seem to find time to do these things that I enjoy.

At this point you might be thinking, “so what does that have to do with finances?” The answer is that it has everything to do with finances. Each decision is predicated on either earning more money or spending less money. That is the rub. The dirty secret that is all too taboo in our society. Money, if used properly, can in fact make your life better.

In all of the financial advice I give my clients, one message remains the same: your money is your happiness. Secure your money and you will secure your life. Of course this advice means different things to different people. The “do-it-yourselfer” may read this to mean that they should be frugal and save every penny, to have a brighter tomorrow. The “fly-by-the-seat-of-your-pants” kind of person might read it to mean that they should spend everything to have a brighter today.

Luckily they are both right. Each individual can and should examine what is important to them. They should set out (I mean by actually writing it down) a plan in light of what is important to them. They should take steps over time to fully implement that plan and they should review the plan periodically to ensure that they are still pursuing goals that are important to them. This is what I teach clients and this is what I try to implement in my own life.

I spend more time at home with my family and I hire rather than do some things myself. In short I force myself to do what is not what I would normally do. After exploring my (and my wife’s) goals, that was what was important to us. Having made a lot of progress towards these goals, I can tell you that my life is a thousand times better today than when I started. I fully expect it to be a thousand times greater in the future.

This is what true financial planning is all about. If you have not explored your goals, I urge you to do so now. If you haven’t met with a financial professional to discuss your goals, I urge you to do so today. Once you start making progress towards your goals, you will wonder why you didn’t do so sooner.

Defining your savings goals is the first thing to do before you invest, especially when that investment will have an impact on your childs future.

It is after-all your childs future that you are investing in–and school finance cannot be avoided, as babies will grow into adults who need to be given the best opportunities we can offer as parents.

The best advice that any parent can get is to start saving early. College tuition fees can cause a strain on your family’s budget and lifestyle. You need to have a goal to keep you motivated to save. And what better motivation is there than knowing that the money you save will finance your child’s education.

Normally the best stage to start saving for your childs finance towards college tuition is at birth. If, however, you have not started, then the time to start saving is now. It is never too late to start saving.

The sooner you start saving, the more time therell be for compound interest to build up into a nice college fund for your child. Remember that each child should get his or her school finance savings fund.

You also need to decide the amount you intend to save by the time that your child reaches college age. There are many options available for you to choose from when it dollar amount. This means that you calculate the projected cost of public college tuition by the time your child is ready for college.

The other commonly used method, which many parents prefer, involves devoting a fixed percentage of income to their child’s future college costs. The idea is this: whatever you do, you have to have a defined goal. You should save as much as you can, whether it be a large amount, like several hundred dollars a month or a more modest amount, such as $25 to $50 each month.

A college education is an investment in the future of your child. If you truly want to see your child succeed, as all parents do, what could possibly be a better investment?

Open an Online Savings Account
With the popularity of the internet many financial institutions are beginning to see that they can offer their customers many different options. There are several financial institutions that have decided that they can give their customers more services because they have cut their overheads by operating completely online. Using an online bank is often times much better than using your local banking branch, and when you open an online savings account you will find that the fees are much less and the interest rate is much higher which puts extra money in your pocket.
One of the first questions or concerns that many consumers have is when you open an online savings account is your money safe? The answer is yes; if they are FDIC insured that means that your money in an online savings account is insured by the federal government just as it would be in your local bank. It also has the limits of $100,000 per depositor.

The next question is usually how do I actually open an online savings account? It is very easy, you go online and decide which banking institution you would like to use. They will then have an application to fill out which will include all your personal information. Once you submit the application they will then print it all out and mail it to you to be signed.

When they mail your application anyone that will be a signer on the account will have to sign the application and signature card in the appropriate places. They will then ask you to include a photocopy of all the signers’ driver licenses. This is due to the changes in bank laws after 9/11. At this time you will then include your deposit, and as with any transaction done through the mail, do not send cash.
Once they have received your deposit they will send you your checks or debit cards to access your savings account. Most of the online banks give you one or two free times to use an ATM machine to access your funds without charging you a fee, check the terms and details of your account to make sure.

Depositing money is also a question that most people have with online savings account. You can deposit your money three ways. First you can mail in a check for deposit, make sure it is indorsed “for deposit only” and mail it certified. You can also have money direct deposited from your employer; just fill out the proper forms that your employer will give you. Next you can transfer money online from any other banking account, there is usually a limit of how much you can transfer and the bank you are taking the money from usually charges a fee.

If you want to save and earn a higher interest rate then your local bank can offer, open an online savings account. Your money is safe, easy to access and will earn you a higher rate of interest and accrue fewer fees than with a standard local bank.