Saving and Investing
Saving is a way to accumulate money for future needs. Savings provides funds for emergencies and purchases. The primary goal of savings is to store funds and keep them safe.
Keys to Successful Saving:
- Use direct deposit for your income.
- Pay your bills on time to avoid late fees.
- Stick to your spending plan/budget and resist unnecessary purchases.
- Avoid check-cashing or rent-to-own stores because of their high interest rates.
- Take advantage of special savings (like holiday or vacation accounts) at your financial institution.
Tips and Tools
- Knowing and understanding the financial jargon will get you started on the right path to financial success. Use the Financial Jargon IQ Worksheet to check your knowledge of some important financial terms.
- The first step to financial success is to understand if you are an over-spender. Take the Overspending quiz to see if you fall into any spending traps.
- Pay Yourself First is a term that is often used when discussing saving money. It means you make savings an expense in your spending plan/budget and treat it just like any other bill that must be paid.
- Financial calculators can help you estimate how much savings you will need for any “big ticket items.” Use a Savings Calculators to help you identify your savings goals.
Teaching your child the basic concepts of saving money can be one of the most important financial concepts you can teach them. Even at a young age, there are strategies that you can use to teach your child the importance of saving money.
- Strategies by age from Choose to Save.
- For preschoolers - Thrive By Five. Even in preschool, you can teach your child about the concepts of saving money. Thrive by Five provides age appropriate, low cost activities that you can use in your home.
- For tweens - The Great Piglet Challenge. This online simulation will help kids from 4th-6th grade start to learn the concepts of smart savings.
- For college students - Cash Course. This program offers young adults tips and tools to become financially savvy around financial basics, paying for college, college life, world of work and economic survival tips.
Michigan has a few state college savings plans that can assist families and individuals when planning for their children’s higher education. Here are some available options:
- Michigan Education Savings Program - Offered through the Michigan Department of Treasury, Michigan Education Savings Program provides families a smart, flexible way to save for their children’s future.
- Michigan Education Trust - The Michigan Education Trust (MET) program allows parents, grandparents and others to pre-purchase undergraduate tuition.
Saving for Retirement
Want to see a rough estimate of how much you will need to live comfortably in retirement? Check out the Ballpark Estimate from Choose to Save.
Or try this Ballpark Estimate Worksheet for more personalized use.
Saving for Retirement at Each Stage of Life
By Katie Bryan, America Saves communications director
No matter how old you are, saving for retirement should be a top priority. While knowing how much you will need to live a comfortable retirement and saving to reach that goal is the key, here are some quick tips for saving for retirement during each stage of life.
Saving In Your 20s
- Save at your workplace – Starting early is one of the best ways to save for retirement. Take advantage of any workplace retirement plans you can and make sure to contribute enough to receive matching contributions. This is one of the few places you will get a 100 percent return on your “matched” investment.
Saving In Your 30s
- Plan for how much you will need to save with the Ballpark E$timate tool.
- As your salary increases, consider gradually increasing the percentage you contribute toward your retirement.
- Consider expanding your retirement portfolio to include at work or outside of work savings options.
Saving In Your 40s
- Calculate how much you will need to save for retirement. According to Employee Benefit Research Institute, nearly half of workers age 45 and older have not tried to calculate how much money they will need to save so that they can live comfortably in retirement.
- Pay off as much debt as possible.
- Consider increasing retirement contributions.
- Address any life changes that could impact your retirement plan.
Saving In Your 50s
- Play catch up. Once you turn 50, you can make “catch-up contributions” — an extra amount, beyond the normal limits, that you can make to tax-deferred retirement plans.
- Review your accounts to learn when and how you can withdraw money from your accounts, and make sure you are on target with your savings to last your through retirement.
- Estimate how much you will receive from Social Security and determine the age you should apply for Social Security benefits.
Saving In Your 60s
- Waiting a few years can add up to greater payouts from Social Security. Decide when you should start receiving Social Security benefits.
- Find ways to reduce your spending so that you can live within your means during retirement.
Need help finding ways to save? Take the America Saves pledge to make a commitment to yourself to save and receive emails and/or text messages to keep you motivated.
America Saves, managed by the Consumer Federation of America (CFA), is a non-profit research‐based social marketing campaign that seeks to motivate, support and encourage low- to moderate-income households to save money and build wealth. Learn more at americasaves.org
Individual development accounts (IDA) are a financial and economic development tool designed to help low-income families save and accumulate financial assets. There are many different forms of IDA programs. Usually, individuals can save for one of the three following categories: homes, businesses or education. For more information, click here.
Michigan Tax Credits
To learn more, visit the Michigan League for Public Policy.
Investing does not mean the same thing as saving. It is important to understand and realize the differences between the two terms. Use Financial Security: Savings and Investing to learn more about the differences between these two important variables in your life. Tip: you can think of savings as short-term goals and investing as long-term goals.
Investing involves taking varying levels of risk and focuses on increasing one’s net worth (total assets - total liabilities) in order to accomplish mid- and long-term financial goals. An example of an investment can include: stocks, bonds and mutual funds.
Planning Your Investing Strategy
- How Time Affects the Value of Money
- Understanding Your Personal Risk Tolerance
- How Much of a Risk-Taker are You?
- What is Your Investment Concept IQ?
- Your Time Horizon
- Risk and Return Relationship
- What is your Investment IQ?
- Comparing Mutual Funds
- What is Your Mutual Fund IQ?
- Stock and Mutual Fund Newspaper Listings
- Life Cycle Investing Profiles