Babyboomers.com

From Baby Boomers to Gen-Xers, Americans today are more focused on the need for saving than they have been in decades. In fact, 73 percent of Americans believe they’re not saving enough. While their reasons for needing to save more may differ, overall Americans saved two percent more of their income last year.

This increase represents the third straight annual increase, not counting pension benefits and social security. While America’s personal savings rate is still below many countries, this increase marks a favorable turn in Americans’ attitudes toward saving.

Americans are taking more responsibility for their finances for several reasons: they are less reliant on Social Security; they are changing jobs more frequently and; companies that used to provide employee pensions are now asking employees to contribute to their own retirement through a 401(k) plan. As a result of these and other changes, Americans are taking a more active role and becoming more educated about their finances.

This increase in personal savings is good news, but experts say it is still not enough. How much is enough should be based on your individual goals. Typically, experts recommend saving between 5-20 percent of your annual income. But whatever your goals or the amount you’re saving, the first leg of any financial plan should be a cash reserve of secure and easily accessible funds.

“The purpose of this cash reserve is to help balance out the risks of other investments and provide a reserve for unexpected purchases that may force you into debt — for instance replacing your furnace or other home improvements, repairs to your car or medical bills,” said Todd Berkley, vice president, savings and certificate products for U.S. Bank.

Save More

If you fall into the 73 percent of Americans who believe they aren’t saving enough, it’s time to start no matter what your age. Following are tips for becoming a more savvy saver:

• Take advantage of direct deposit through your employer by automatically depositing money from each paycheck directly into savings. Even $25 per paycheck adds up over time.
• Maximize your 401(k) contribution. Typically you can contribute as much as 10 or 15 percent of your pretax income to a 401(k) plan. If your employer matches a certain percentage of your contributions, be sure you are taking full advantage of the match.
• Fund an individual retirement account (IRA) to start building your retirement nest egg. You can put funds in an IRA (with extra tax benefits) that will earn interest until you are ready to start collecting on it.
• Cut back on spending by assessing your unnecessary purchases. For example, tuck away some of the money you typically spend buying morning coffee or eating out for lunch.

Save Smarter

Whether you’re just beginning a saving program or reassessing your current savings mix — researching your savings options can make a big difference. If you are saving for short-term expenses like a down payment or building a cash reserve for emergency funds, you need a low-risk savings vehicle that is easily accessible. Stock mutual funds or stocks aren’t the best choice for these goals. But don’t assume that a checking or savings account, a certificate of deposit (CD) or bonds are your only options.

One of the best savings options available today is an indexed money market account (IMMA). They offer excellent security, access and interest rates and also work well with checking accounts.

Indexed money market accounts are like passbook savings accounts, but typically pay a higher rate of interest. They are usually FDIC insured, offer accessibility to the funds and can require a minimum balance between $5,000 and $50,000. For example, U.S. Bank offers an IMMA with a $5,000 minimum balance that guarantees a competitive interest rate based on the 13-week Treasury-Bill (T-bill). The account is FDIC insured up to $100,000, allows you to write up to three checks per month and offers 24-hour access to the funds you have in your account from most ATMs including nearly 3,000 UBank ATMs.

“Indexed money market accounts have been a well kept secret — but can offer the best opportunity to earn more interest without sacrificing easy access to the funds and security,” said Berkley. When choosing an IMMA, Berkley advises consumers to consider the following:

• Don’t confuse IMMAs with money market funds. IMMAs are traditionally offered through a bank and money market funds are typically offered through brokerage firms. While both can be a valuable part of a financial plan — the main strength of an IMMA is the fact it is FDIC insured and offers greater accessibility (typically you can transfer funds between your IMMA and checking account 24 hours a day via phone or ATM.)
• Shop around for the best interest rates and account features. For example 24-hour access to the funds over the phone and from an ATM allows you quick and easy access to your funds.
• Ensure the advertised or quoted interest rate of an IMMA applies to the minimum required balance. Some banks advertise rates that apply to larger balances.

Whether you have money in a traditional savings account that could be earning a higher interest rate or you’re looking for better access to your cash, be sure to consider an IMMA. U.S. Bank is a member of Federal Deposit Insurance Corporation.

For more information, contact Jennifer Hovelsrud, Karwoski & Courage (612) 342-4342.