How to select the right savings plan for yourself

Whatever your walk of life or long-term goals, there are so many different savings plans to choose from. There are all kinds of accounts offering vastly lower and higher return rates, different levels of security, and customized options to ensure your expectations are met and hopefully exceeded. With varying interest rates, terms, penalties, and minimum investments, being well-informed before you begin a savings plan can make all the difference.

If you are a student, or have a child you wish to be able to afford to put through college in the future, you will find many available savings plans. One of the recent most-talked-about plans is the 529 College Plan that Congress authorized as part of the Economic Growth and Tax Relief Reconciliation Act in 2001. Now you have the option of purchasing prepaid college credits that freeze tuition at the value at the time of your purchase.

This means that as tuition inevitably increase, your cost will be the same however many years down the line it is until your student is ready to move onto campus. The other option the 529 College Plan offers is investing in a mutual fund based savings account that will earn interest without taxation as long as it is untouched. The money in this type of savings plan can only be applied to tuition, room and board, or other college related costs such as books.

For those thinking ahead to retirement, it can seem overwhelming sifting through the different savings options. Rest assured that there is one that will best suit your specific needs. IRAs are savings accounts that either earn tax-free interest or offer tax-free withdrawals at the time of retirement. They have steep penalties for taking money out early, but offer fairly good interest rates and stability. You will most likely be paying annual fees and commissions to your account manager, but this ensures that he or she will do their best to cause your IRA good growth as it reflects in their pay checks as well as yours.

Deferred annuities are generally thought of as a very safe investment as they are issued by life insurance companies and so have the full backing of the company. While these investments may be great for those with a long-term set of goals and plan of action, for many people, investing their money in a savings plan is something from which they intend to reap earlier benefits. There are also several good short-term savings plan worth checking out as you evaluate your needs.

Certificates of Deposit, more commonly known as CD’s, offer one of the safest investments on the market today. Issued by banks, they are covered by FDIC insurance up to $250,000. The longer you are willing to leave your money tied up, the better interest rate you are likely to receive. The penalties for withdrawing funds early from a CD can be high, especially considering the relatively low interest rate.

Money Market funds are another good low risk, short-term investment one could make. They are available through most banks and insurance companies. They have very good interest rates with high yields, but often require a much higher minimum investment, making them out of reach to many individuals with low capital.

There’s always the tried and true, old-fashioned savings account at your local bank. You can never go wrong with one, especially if you’re looking to earn a little interest on your extra cash without the commitment. You can withdraw from a savings account several times a month without incurring any additional fees. Most have different options to customize your account, and they typically require that you keep only a minimal amount of money in the account to avoid a surcharge. They are easy to maintain, and most banks have excellent online systems to serve your banking needs.

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