However, trusting children with cash is at the heart of teaching financial literacy in the home. If we want them to understand money, we have to let them handle money. More importantly, we have to truly empower them to decide, after we have taught them the right principles behind money management.

I know of a mother who was widowed and had to feed and clothe four children alone. Gainful employment was hard to find because she was a homemaker before her husband died. It was very tough for the whole family. (more…)

The holidays — with our natural penchant for gift giving and food-binging — got me to thinking about saving all over again. We always stress the virtue of saving because what we save is the treasure that we bring to the future. But what we often forget is that saving, in practice, does not mean that we should stop spending.

The point of saving is not only to accumulate but also to save for something. We cannot minimize for the sake of minimizing. Ibenizer Scrooge was a miser until the three ghosts put cause-and-effect in perspective. He had that privilege; some of us may come to that conclusion too late. (more…)

You raise a very interesting point Rose and I am very sure that there are a lot of people out there who are asking the very same thing.

From the standpoint of government, taxes are its lifeblood. It does not really matter if we are talking national or local. The plain fact is that tax collections allow the government to provide services to its constituents. (more…)

All of these factors predispose many depositors toward banks and cause them to overlook some attractive alternatives instead of considering them carefully and objectively.  Before assuming that bank offers you the best all possible vehicles for your savings, you ought to consider the alternatives discussed in chapter 5 and in chapter 17 through 22.

CLOSE-UP:
LEGAL PROTECTION FOR DEPOSITORS

Deposit Insurance

Federal insurance coverage for bank deposits-through the federal Deposit Insurance Corporation for commercial banks and many savings bank and the Federal Savings & Loan Insurance Corporation for savings bank and savings-and-loan association—protects depositors to a maximum of $100,000 at any one bank.  All federally chartered banks are required to be members of the FDIC; state chartered banks need not belong, but most do.  (more…)

Interest vs. Liquidity
The fact that the interest rate on a certificate of deposit is fixed and unchangeable may turn out to be either an advantage or a disadvantage.  When interest rates are at a peak, a bank will have to offer certificate at a fairly high interest rate to attract buyers.  If you buy a long term certificate at that time, you will lock in a high rate, and continue to receive that the rate even if interest rates drop precipitately.  Conversely, if interest rates are low at the time of your purchase, you will lock in a low rate for the entire term of the certificate. (more…)

Like a regular savings account, a money market account  typically earns interest at 5.25 percent up to a specified balance—usually  $1,000 to $2,500.  Beyond that level, the interest rate rises to what banks call the “market interest rate”—a rate that fluctuates but normally is about one percentage point higher than the rate paid on Super NOW.

Like a savings account, the money market account is federally insured, and there is no limit to the size or the number of deposits or withdrawals that you can make.  But while you are entitled to write three checks per month on the account, exceeding this limit can cost you a penalty of $5 to $10 per check.  And, because its interest rate is higher than that of a regular savings account, some people use the money market account as a temporary parking place for funds awaiting other kinds of investments.  Keeping such funds in a regular savings account or Super NOW account would earn them less, and depositing them in a non interest paying checking account would earn them nothing. (more…)

With passbook accounts, all deposits, withdrawals, and other transactions are recorded in a book that the depositor holds and presents with each transactions. (Passbook account transactions are, of course, also recorded by the bank’s computers). Before the advent of computers, this was the standard type of savings account. Some consumers still prefer the passbook account—perhaps because it represents tangible evidence of their savings balance—even though the passbook are easily lost or misplaced and passbook depositors do not have access to automated teller machines. (Some banks no longer even offer passbook accounts.) (more…)

Whether you are saving for the short term or the long, however, you should be concerned with three factors. You want your savings to be protected against total or partial loss; you want them to grow by earning interest; and you want them to be readily available.

Unfortunately, there is no investment that will simultaneously satisfy your concerns for safety, yield, and liquidity. Whether you invest your money in a savings account, stocks, or real state, the higher the safety, the lower the yield, typically—and the higher the yield, the lower the liquidity. This is why bank savings account, for example, which are both safe and liquid, (more…)