With all the negative news about the economy and how supposedly the world is coming to an end, it’s no wonder everyone is looking for a safe place to invest their money. But even shoving your cash in a coffee can, putting it under your mattress, or burying it in the backyard may not be the safest options!
Before you invest your money, here are two questions to answer?
- What are you investing/saving for?
- How much safety vs. risk do you want?
Let’s break each of these down…
What are you investing/saving for? This will help you to determine what you should put the money in. So are you investing for retirement, saving for college, or just putting money aside for a new iPod? For example, if you’re saving for a retirement, you would want to put your money in something like a Roth IRA, which is essentially a retirement savings account. But if you put money in a Roth IRA, you can’t touch it until you retire, so obviously this option wouldn’t work if you were saving for college, because you would need the money sooner.
How much safety vs. risk do you want? The idea is simple: the more risk you have, the greater possible returns you can make. Of course, you can also lose a lot of money as well. The safer an investment is, the smaller returns you’ll make, but then again, you can feel more secure with your money. A big factor to consider here is time. If you’re investing for retirement (which seems like light years away), you can afford to be a little more risky, because you have time on your side. But if you’re putting money aside for college which you’ll need next year, you want less risk, because you have less time to make up for any losses that could occur.
Once you answer these two questions, you’ll have a better idea of where to put your money so that it makes sense for you and your situation.
YOUR 2 CENTS: What are your thoughts about good, safe places to invest your money?
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Savings accounts are, of course, the first thing most people think of. But you should always take a careful look at your savings account before you open one. Do they charge any fees? Is there a minimum required balance? What rate are they offering for your money. Online savings accounts have higher rates and few fees, but you need a checking account at a regular bank before you can get one.
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As for savings accounts there is also the problem of interest rates vs. inflation. It might sound good to get a 2% annual return on your money but if inflation rates are 2% or more, then you’re actually becoming poorer. Secondly you’re going to be taxed on your interest earnings so if inflation is at 2% you would want a savings account to pay you 3% just to keep the status quo.
As for retirement I am not against putting it into some retirement account because that is probably the best thing you can do passively. But leaving your money to someone else and depend on them to take care of the money you’re going to live off when retired is VERY risky if you ask me! But it IS passive
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