Financial Tips | Debt Management

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10/2/07

How to Put Your Money to Work

What does it mean to put one’s money to work? Basically, when you have money, 99% of the time it is sitting in a checking account. Most people that have their money in a checking have it in a non-interest bearing checking account. There are many reasons why this could be. First, the account minimum for an interest bearing checking account is almost always higher than for a regular checking account, and you may not have the additional necessary funds. Second, you may not know whether your bank offers an interest bearing checking account and, therefore, have never inquired about such. Last, you may not care.

Let me clear something up before we move on. Interest bearing checking accounts are not going to make you rich, however, why would you pass up free money? Additionally, this article is intended for your normal money supply (normal money supply means the money you use to pay bills, buy groceries, and use for all of your other living expenses), not money that you have set aside for investment. It would not be practical for you to move all of this money to a savings account, because savings accounts usually do not come with check writing privileges or debit card options. Therefore, you would have to constantly move money between your savings and checking accounts in order to pay bills. What is the solution? The solution is to find a bank that offers a decent interest rate and a low enough minimum balance for you to take advantage of interest bearing checking. Note that you may have to look beyond the “major” banks in order to find something like this.

Interest bearing checking is not the only way to make your money work for you. Investments such as real estate and the stock market can offer continuous returns (appreciation and rents in real estate and dividends and capital gains in the stock market) on your money. The problem that arises with these investments is the level of risk involved. As many people recently learned, it is easy to lose your real estate investment if you get in over your head. Additionally, unless you know a little bit about financial speculation, the stock market may prove to be a waste of time and money. Also, these investments may need a lot of initial capital to start and, therefore, may not be appropriate for your “normal money supply.”

Under the worst case scenario, you could put your money in a savings account. It will offer a higher interest rate than will interest bearing checking, but will have the disadvantages discussed above.

Find ways to get your money working and you will find that all of those extra dollars acquired by way of interest or investment will really start to add up!


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