Financial Information

In a patron driven world, it feels like kids are not the only ones who aren’t getting an education in savings. With a typical credit card debt of $14,750 per home in America, it seems like even adults are having a tricky time saving cash for the things they want, and instead are charging far too many things to their mastercards. Fortuitously for both adults and children, current savings account rates are doing a superb job of inspiring more folk to save their money - which is a good habit to obtain, no matter how old you are.

It is possible to find a deposit account with .90% APY; and that APY is what you get paid to save your cash with the bank, not what you are paying a credit card! This APY is fairly typical of the interest that most banking establishments are offering, though it’s always a good idea to test around and see which savings accounts offer the best rates. While you are doing that, it’s also a great idea to get some saving account questions answered, such as :

Are interest rates compounded daily? If not, how are they compounded?

When are interest takings posted?

Is there a once a month charge?

If there is a monthly charge, is it waived if I keep a minimum balance in my saving account? If so, what is the minimum balance?

Do i get an ATM card?

Is there a maximum number of times I will use my ATM card in a month?

How am I able to make my deposits?

Can I link my savings account to other accounts for overdraft protection?

It’s often best to select a banking establishment that offers not only competitive IRs, but also offers options which make it easy to use. For example, a high-interest account that only allows two withdrawals a month is not as convenient to use as one that allows 10 withdrawals a month.

Remember though, to select the high-interest account that is just right for helping you save. In your specific situation, as an example, you may like a deposit account that only allows two withdrawals each month, because it would help you keep your money where it belongs - in savings. So whether you are looking out for a saving account to help teach your kids to be responsible with cash, or you are endeavoring to teach yourself the same money lesson, select a savings account that will help you accomplish those goals - if it is one with limits on withdrawals, one with savings account calculators, or one with Cash cards.

Selecting the number one place to put your cash to work earning high interest CD rates may involve doing some research. Many different banking and investment institutions offer a variety of benefits. In actual fact since they’re truly the ones gaining from your business, do not be shy about asking for the best rate and conditions available. Since saving money is a technique to plan for both your shorter term and long term goals, you will want to choose an FDIC member establishment that offers competitive interest rates, easy terms and maturities, low minimum deposits and simple accessibility.

While savings account, checking account and CD insurance are ordinary at any FDIC member institution, some CDs are far more complicated than others and present a raised level of weakness. Variable rate CDs fall into this class, as do special feature and long-term, high yield CDs. Banking institutions may reserve the prerogative to “call” these investments if yield rates drastically change. CD insurance can defend your investment from being “called in” for no less than the first year. It’s also important to remember that just because an investment institution has an FDIC sticker on its door, it is not an automatic guarantee that all business conducted inside is insured by the federal government.

Banks and similar establishments want your cash and are prepared to compete to get it. You can comparison shop online for the best rates, which ought really to be compounded daily and posted monthly. Naturally, the larger your deposit and the more you leave it, the higher your potential return. On the other hand, if you lock big quantities of money in and the rates increase seriously over time, you are at risk of losing potential earnings. Look for flexible terms and straightforwardness of access.

Find a banking or investment establishment that allows you a variety of options when it comes to placing your cash. Investment periods of six months to five years or more and an automated renewal feature at maturity are nice benefits. Ask to see the particular maturity date in writing so that there’s absolutely no mistake and your money doesn’t sit idly for days, weeks or maybe months when it might be reinvested and working for you. You may also wish to know the procedure for withdrawing your cash when the CD matures. Because your certificate of deposit is a fantastic opportunity for structured savings, bother to buy it sensibly and like to watch it grow.

Concerned about the high cost of healthcare? Worried that your insurance doesn’t cover all your costs? Fortunately, a partial solution may be just around the corner. Since January 2004, taxpayers have had a tax savings tool called Health Savings Accounts, or HSAs. These HSAs may solve many of your healthcare cost problems.

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How an HSA Works

In a nutshell, HSAs work like this. You buy a specific type of major medical, or catastrophic coverage, insurance called a High Deductible Health Plan. (This special HSA-compatible insurance is also known by the acronym HDHP.) Then, you annually contribute up to roughly $5,100 for a family and up to $2,600 for an individual–to a special health savings account. (Note that slightly higher deductions are available to taxpayers over the age of 55. Also, annual deductions are indexed for inflation.)

How You Save Taxes with HSAs

HSAs work because you get a tax deduction for the money you contribute to the health savings account. However, as long you spend the money in the account for eligible healthcare expenses—pretty much anything reasonable—you aren’t taxed when you withdraw the money. Note that HSAs deductions are not limited by taxpayer incomes.

In effect, the HSA makes all or most of your uncovered healthcare expenses fully deductible. This is a big deal because for most people, healthcare expenses are not deductible.

Just to put the value of an HSA into perspective, a family can save from $500 to as much as $1750 annually in income taxes by using one of these accounts. The final savings, predictably, depend on family income and the state where the family lives.

One other thing. Don’t confuse HSAs with the old style Flexible Spending Accounts, or FSAs. With FSAs, you lost the money you didn’t spend by the end of the year. With HSAs, you don’t lose the money. The unused balance just carries forward to the next year.

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Aren’t Medical Expenses a Tax Deduction Anyway?

No, not really. For most people medical expenses are not a tax deduction. Here’s why. Healthcare expenses do count as an itemized deduction for people who don’t use the standard deduction. However, only the portions of one’s healthcare costs that exceed 7.5% of adjusted gross income get deducted. That means that most people never get to use their healthcare costs as tax deductions because their healthcare costs don’t cross the 7.5% threshold.

Another Benefit: HSAs May Also Save Premiums

HSAs sometimes produce another economic benefit. The HDHP insurance itself may save people money because they buy less insurance. This is especially true for people who aren’t already using major medical insurance.

How to Set Up a Health Savings Account

HSA accounts aren’t difficult to set up. Essentially, you do just two things. (1) Get medical insurance that qualifies as an HDHP, and (2) Open an HSA account with a bank that offers HSAs. Your current medical insurance provider is a good place to start your search for HDHP insurance. You can also check with your state’s Blue Cross or Blue Shield insurer.

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Three Warnings about HSAs

For what it’s worth, I am now using an HSA myself. (I got my HDHP from Premera Blue Cross and use an HSA account from HSA Bank.) But let me also share three caveats: First, obviously, you never want to cancel one insurance policy until you’re sure you have a replacement policy. Second, you do need to be careful about the fees associated with the HSA “bank account,” so shop around. Third, if you withdraw money from an HSA for something other than a valid medical expense, the withdrawal is taxable and subject to a 10% penalty.