Should You Even Bother With a Savings Account?

by MD

I’ve spent so much time searching for the best online bank account, that I missed out on starting an interesting discussion. There’s a whole other side to the issue of savings accounts here. That’s the side against a savings account. I was too busy praising savings accounts that I forgot about the possibility of not even holding a savings account. I didn’t even consider that some readers don’t even want to bother with a savings account.

When I wrote about chasing interest rates, an unattractive reader (and friend of ten years), Vincent wrote in with his views on savings accounts.

I prefer to have a non-interest bearing account with no fees. The money you make on interest has to be claimed on your tax return and since the amount is so small I prefer not to deal with that. Truthfully I try to keep a very small amount of money in the bank and keep my life more private.

This comment leads to the obvious question. Should you even bother with signing up for an online savings account? For some of you reading this the answer is clearly in favor of a savings account because you want your money to be secure at all times. Then there’s the flip side that feels that there are way better options for your money than keeping it in a savings account. I wanted to briefly look at both sides to the argument.

Why should you not bother with an online savings account?

I’ve covered the best online savings accounts here in the past. While writing up about different bank accounts I was totally transparent and told you guys that the interest rates are not impressive with savings accounts these days. The truth is that a savings account comes with no risk, which means that the reward aspect is also low. You’re not going to earn much money on your money with a savings. To an aggressive investor this is a huge turn off.

A savings account is also a boring way to invest money for those reading this that want to see instant results. With real estate you deal with tenants, with stocks you can buy and sell at any given time, and with your own business you see many swings in revenue and growth. With a savings account your money just sits there and earns a tiny percentage.

Why should you bother with a savings account?

There are many benefits to a savings account. I’ve covered savings accounts here many times, so I’ll just skim over the main benefits:

  1. Security. With a savings account your money is FDIC insurance up until a pretty high amount and there’s no risk involved. You’re not investing your money in a company or a property that you’re praying will appreciate in value. Your money is locked up and safe.
  2. Passive investing. You don’t have to do anything once you place your money in a savings account. This means that your investing is passive and you can focus on other areas of your life.
  3. Liquid money. You can always access your money in your savings account. It might take a few days to physically get the money, but your money is always fairly liquid and available to you in case you really need to access it.

I’ll summarize by saying that a savings account won’t give you the best return for your money, but at the end of the day you’ll know that your money is always safe. For some of us that feeling is priceless.

You have the information that you need and now the decision lays in your hands if you want to keep your money in a savings account. The great news is that you don’t have to go all or nothing. If you want to be more aggressive with your money, you can always keep your emergency fund money in a savings account.

 

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What You Need to Know About The Stock Market So You Don’t Lose Your Pants

by MD

When getting started with investing in the stock market, it’s critical that you do a little research in advance so that you don’t lose your pants as a young investor.

After much discussion about what to do after in college in terms of career options, it’s important that I go over options for your money. You come here because you want to know what to do with your hard earned money. You’re looking for solutions to basic and complex financial problems. My goal is to help you make more money and keep more of it in your pocket.

To make more money, many young people are going to want to get involved in the stock market. I’m here to go over some common questions about the stock market for beginners.

I realize that understanding the stock market will sound scary at first. After a little bit of research and practise, you won’t be confused about the stock market at all. Granted, you’ll still be upset when your shares go down in value, but you’ll know what’s happening.

We’re going to go over some stock market basics to help you understand what’s going on.

Why do some people get rich off the stock market?

You can make money off the stock market by taking lots of risks and having luck on your side. However, the reality is that stories of new investors getting “rich” off the stock market are usually greatly exaggerated. It’s really easy to get all excited about the stock market because of these get rich quick stories. The stock market is sort of like blogging in this sense. New investors want to get in because they hear stories of easy ways to make big money. They sign up with an online stock broker and think that everything is going to work out.

The truth is that you can make money from the stock market if you buy stock in a company that happens to be undervalued. Over time the company will make some big moves that will equate to the price of the share going up. If you own a decent amount of shares and the price per share goes up high enough, you can sell your shares and enjoy your profit.

Let’s put some numbers behind this so you see where the money is made from investing in the stock marketing.

Let’s say that Studenomics goes public one day. After about a month or so the price of a share is $2. You decide to grab 1,000 shares. For the sake of brevity, we’ll assume that no stock splits or any major incidents happen during this time. Now let’s assume that the company is bought by a colossal corporation. This news drives the stock price up to $10. What does means is that you went from having $2,000 in shares ($2 x 1,000) up to $10,000 in shares ($10 x 1,000).

In this simplified example, you made yourself $8,000 before taxes just because the stock price went up. You can imagine how you can get rich from investing in the stock market if you have more money to play with or if the stock price soared up even higher.

Can young investors lose a lot of money on the stock market?

As much as the value of the stock that you buy can go up, it can go down as well. When you learn how the stock market works, you’re going to realize that you can actually lose a decent chunk of change. The value of a share can drop dozens of dollars in a day just with the release of bad news. You can lose half of your money before you even get home from work. Even major economic issues that don’t affect the companies that you own shares in can drive the value down.

Why risk your money with investing in the stock market?

The reason that young investors want to even take the risk of losing money is because they want to make money on their money. New investors will quickly find out that there’s only so much money you can generate from interest even if you find the best online banking account. This is why many of us will turn to the stock market to make money with our money.

Anything else you need to know about the stock market?

Do you want to know how does the stock market work? This was another post on here that led to a thought-provoking discussion about stocks. I wanted to share some of the insights here for those of you that are looking for more stock market basics.

Laura wrote in about understanding the stock market:

Your advice is sound. I would add one more suggestion. If you’re interested in a particular stock and know something about the company and the industry in which it operates, before you buy, follow the stock for a time and try to learn about the market volatility (cycles and spikes) that are typical in that industry. There’s lots of good information available for free or at low cost online (in the old days people relied on stock brokers for this type of info). The more you understand before you invest, the better you’ll feel about your investment, no matter how it turns out.

Edward on index funds:

An index fund is going to be the easiest, but not necessarily the safest investment. Even if the stock market as a whole goes down on a particular day, some stocks will go up. I personally like mutual funds. Even when everything went down a couple months ago after the U.S got it’s credit downgraded, one of the funds in my IRA still gained money.

If you have any more questions about the stock market then please leave a comment below. With stock market basics out of the way, we plan on going into more detail on understanding the stock market coming up next week.

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Why You Should Get a Life & Stop Chasing Interest Rates

by MD

Do you chase interest rates? Are you looking for the highest interest rate possible for your savings account?  I used to chase interest rates. Now I’m a happy customer with ING Direct.

I recently got a letter in the mail about an inactive online savings account. I totally forgot about this account and it went inactive. The reason that I even signed up for the account was because they offered a higher interest rate by a tiny percentage and a $20 sign up bonus. After logging in a few times I realized that the service was sub-par and that I couldn’t easily use the online banking feature. This simply wasn’t the best online banking account for me.

Before this experience I was hesitant to join ING Direct because of the lower interest rate. After my poor experience with the other bank account and based on the recommendation of my blogging peers, I joined ING Direct and have been with the company ever since.

Along the way I learned that it just wasn’t worth chasing interest rates. It may sound sexy at first to go after a higher rate on your savings account, but it’s really not that big of a deal in the grand scheme of things. I no longer worry about interest rate changes on my savings account and I wanted to share why you shouldn’t care either.

Why should you stop chasing interest rates with bank accounts?

There are better investments out there.

I find that there are many better investments out there than a savings account. It makes sense to get a competitive rate for your hard earned money. It doesn’t make sense to only keep your money in a basic savings account.

What are three better investments than a savings account?
  • Education.
  • Unique experiences.
  • Real estate.
As you can see, you can easily find a better investment tool out there than a savings account.

The user experience is more important.

This might sound a bit odd but I actually care about the user experience much more than I do about the interest rate. I want to be able to access my account from my laptop or cell phone and make moves with my money with ease. I do this all of the time with my online banking right now. I often create sub-accounts just to save for my various financial goals.

Most decent interest rate offers are temporary.

When I first covered the idea of chasing interest rates, I figured out that most higher rates are simply introductory offers. For young investors, introductory rates are simply not worth switching bank accounts for because you’ll only get that rate for a certain amount of time. Then it’s back to the original rate, which will likely be similar to the rate that you had with your old savings account. Why bother switching for a temporary spike in interest?

There’s always going to be fluctuations in interest rates.

When I tried to find the best online bank account I realized that rates will always fluctuate. Interest rates are simply not impressive at the moment for those of us looking to keep our money in a savings account. The rates could go lower. The rates could go higher. What’s guaranteed is that rates will fluctuate.

Don’t you have better things to do with your time?

When I hear friends talking about interest rates and complex financial strategies, I wonder if they have a life. I would rather spend my time on growing my business, improving myself, and hanging out with awesome people than worrying about banking accounts.

Those are my thoughts on chasing banking rates. There are bigger battles to fight in the financial world. Why waste your time on this? I believe that you should find a bank that you’re happy with and move on with your life.

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What Nobody Will Tell You About The Economy

by MD

Are you worried about economic problems? Is the economy holding you back from making more money?

Let’s start off this article with a common scenario. You’re sitting around with a bunch of casual friends or strangers just chatting away about work, life, and whatever else pops up as the drinks start flowing. Then someone will mention something about how the economy sucks. Then they will start to blame the economy for their problems and the current situation that they happen to be in. This person can’t accomplish their goals as a result of the economy. They decide to bash the economic problems for their financial problems.

Everyone at the table will nod and agree. The economy sucks and there’s nothing that we can do about it, right? It’s much easier to just complain about economic problems.

Actually, blaming the economy for your problems is the worst way to live life in your 20s. That sort of thinking will get you absolutely nowhere. Blaming someone else for your problems is dangerous and will leave to you never taking ownership for your mistakes.

What’s something that nobody will tell you about the economy as you graduate from college?

You can still make money and enjoy yourself if you’re good at what you do in this economy or any other economy.

I’ll be the first to admit that the economy isn’t all that great right now. That’s not a secret by any stretch. What seems to be a secret to some is that you can still make money and find a job. You don’t have to rush back to school during a recession just to upgrade your skills. You don’t have to bash the economy and accept mediocre results.

What’s my proof for saying that you can still make money despite the economic issues?

Look around you. Look at all of the people out there making good money. Do you read monthly blog income reports? Do you see how packed the malls and night clubs are? I recently shared how I went to Cancun and there were thousands of people in the night clubs in January all waiting in line to hand over $60 just to get in. Despite all of the economic issues going on we could still find time to party in Cancun. These people all must be making money somehow. If other young people can make money and afford to travel, why can’t you?

The thing is that economic issues will always exist.

I urge you to stop stressing about economic news. The truth is that you’ll always find more reasons why you can’t do something over why you can actually do it.

You can always blame the recession for going back to school or for not being able to find the dream job, but then you have to wonder why others have been able to succeed if the recession is so tough.

This post was designed to be a reminder to those of you that are stressing out about the economy. I’m curious if you even know what you’re complaining about? Is it worth complaining about the economy? I personally believe in focusing on what I can control and ignoring the rest. Good luck.

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Part-Time Jobs You Should Get off the Couch for

by MD

Last week I suggested that you try finding a part-time job. I shared why I felt it made sense to find some sort of a side gig in your 20s. You can always benefit from making more money, increasing your sense of financial security, and meeting new contacts. I just didn’t want to leave you hanging when it comes to finding a part-time job.

I wanted to share a a few ideas to help you find a part-time gig worth getting off the couch for. This isn’t going to be some “top ten list” piece or some lame article that you walk away from without much change. I’m going to throw out a few options and my hope is that you’ll try at least one of these strategies to help you land one of the best part-time jobs.

Anything related to tutoring is usually lucrative. You can also find work in tutoring relatively easily if you just look around a bit. I posted a case study on here a few years ago on how my friend made money from tutoring and was able to make a dent on his student loans. I would share more on here but that article goes into great detail and shows you how you can start tutoring for money right now. The best part of the case study is that my friend found his part-time job as a tutor with no budget at all. At that point he had already made $2,100 from tutoring.

If you don’t have the patience to be a tutor, you can consider finding some sort of a service job. A service gig can range from serving drinks to shovelling snow. The benefit of most of these gigs is that you can give your mind a rest from the strain of your full-time job or the stress that comes from running your own business. You’ll also force yourself to improve your social skills by being in a situation where  you have to meet new people. This will allow you to both expand your network and become more sociable.

As a final option, you can find work in retail if you want a part-time night job. There are often plenty of retail jobs available in a college town. This is another side gig where you get to improve how you interact with others.

As always you need to ensure that your part-time job doesn’t hurt your performance with what you do during the day. If you notice that your side gig is becoming a detriment to you, then you can always walk away.

Is there a part-time job not worth pursuing? There’s one popular side gig that I purposely left out of this article.

Did you notice that I didn’t mention blogging? Telling someone to blog for money is the easy way out. You go on a personal finance blog, and the blogger tells you that you should start a blog, you nod your head and leave the site even more confused. Everyone would want to blog for money in an ideal world. The reality is that blogging for money isn’t a good option for finding a side gig.

I also wanted to list jobs that pay you money right away. If you’re going to find a part-time job it’s to make some additional money on the side. It’s not to invest money or to invest your time into a project that won’t pay off until the future. Blogging is a long-term commitment and not a job that you start today and get paid next week.

At the end of the day, you’re going to have to just stop complaining and find a job eventually.

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