Spiritual Financial Planning
Short Term Saving

Lindsey Cameron, in the first of 3 articles, talks about the importance of savings and where it might be best to put your money. Hint - it's probably not where you think.
 

  The Baha'i writings make clear that God “hath made the fulfillment of every undertaking on earth dependent on material means,”* and that we “must be like the fountain or spring that is continually emptying itself of all that it has and is continually being refilled from an invisible source.”** How do we make sure we can fulfill these exhortations? By knowing how to save our money to meet our goals, both financial and spiritual.

Some of you reading this may think you don't really have enough money to even think about saving. But keep reading. By keeping these strategies in mind, and budgeting (see the Budgeting article in this issue), you might have more money available to save than you think.

There are 4 saving strategies to consider depending on what you’re saving for, and over the course of the next 3 articles we’ll be looking at each of these. In this article we’ll be looking at emergency funds and short term saving.

Emergency Fund
This is vital—an emergency fund is for health emergencies, car troubles, like if your engine falls out, or if you lose your job. Some people avoid having an emergency fund if they have other reliable sources of income—such as a parent, accessible trust fund or low-interest credit card (though many financial planners suggest that this is one of the last options you should consider, but definitely doable if an emergency fund is a serious financial strain right now). For a lot of people between 3 - 6 months of living expenses saved up in a safe place is enough to see them through a financial emergency. However, a safe place may not mean at your local bank, where the national average interest rate is less than 1% for savings accounts.*** Inflation is around 3%. That’s a problem.

Many people have found that one of the best options for saving money are online savings accounts, which do not require a minimum, and are able to offer higher interest rates, usually around 5%, than your typical brick-and-mortar banks. And since it’s online you have quick and easy access to your money. Also, don't worry – most online banks, just like brick-and-mortar banks, are FDIC assured, so your first $100,000 is insured. These accounts link to your normal checking account and money is electronically transferred between the two. You could also look at opening a Money Market account at your local bank, which usually gives an interest rate similar to an online bank, but they usually require a relatively high minimum, e.g. $2,500 or more.

Short-term Saving
This is for things you'll be purchasing within the next year or so such as new appliances, a computer, a car or car repairs, a vacation, tickets for pilgrimage, or clothing items. Since you'll be using this money in the near future it’s often suggested to keep it in an online bank (described above) or a Money Market account. However, if you are thinking about holding onto the money for 1 - 2 years CDs, or Certificates of Deposit, may also be an option. CDs generally offer slightly higher interests rates than an online bank (and most likely a lot higher than your bank next door) in return for locking up your money for a specified period of time, such as one, two, or five years.

One resource that many people find useful is Bankrate.com, where you can research and compare things like saving account interest rates, credit cards, mortgages, CDs, etc.

Now, once you’ve got your immediate savings needs settled, you’re ready for longer term saving, which we’ll cover in the next article. Stay tuned.
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*Bahá'u'lláh, qtd. in a letter from the Universal House of Justice, September 17, 1992
**Shoghi Effendi, Directives from the Guardian, p. 32
***www.bankrate.com

Comments

[Suzanne]

I've seen lots of online savings accounts, but not any online checking accounts. Which ones have you found?

[Don]

There are several other online checking accounts that offer even higher interest rates. Be careful to shop.

[Suzanne]

Hey! Has anyone checked out the new ING Direct online checking account? You get 4% interest on the money you have in your checking. I just signed up for it. Seems great!