Mr. John Nichols is helping us with our Personal Finance Series. He is a local middle school teacher, owns several rental properties and three years ago he got his real estate license. He strongly believes in using your money and assets to your advantage and also that, "saving money is a second income". He has seen the gap in what is taught at school about personal finances and wants to help parents to be able to fill in that gap at home.
Q- What does savings mean and why is it important to have?
A- Savings is a reserve of money that you do not need to use right now and putting away money you don't need to use right away. It is important to have savings because you need to plan for unexpected events and expenses in life.
Q- Roughly how much should someone have in savings?
A- That amount varies; but in a perfect world, if possible you want to save 10 % of your income. Even if you can't save that amount, any amount is good. Even if it is a small amount it will help you get in the habit of putting money away in your savings.
Q- What options are there for saving money?
A- Depending on what you are using it for you can open a savings account at your local bank or credit union for non specific needs, or put money into a retirement fund or collage savings plan.
Q- Are investments considered savings?
A- Definitely! Especially when you side more on the safe investments. You will not have access to the money right away but it helps with putting money away for the future.
Q- What are some suggestions for talking to our children about savings and at what age should we start those conversations?
A- To help your children have an early start to understanding savings, start as early of an age that they can comprehend any kind of learning. Keep the discussion age appropriate but start talking to them about savings to purchase things in the future. Talk about working for a goal and putting away money to reach that goal.
Q- What are 3 important things you want people to know about savings?
A- 1) Saving up towards your goals helps to teach delayed gratification.
2) Having savings helps you to deal with life's unexpected events.
3) It helps give you peace of mind that money is there; especially if you are living pay check to pay check.
Q- What are things to avoid when trying to have savings?
- Saving too little would be a pitfall.
- You never can save too much if you know you can pull it out as needed.
- Be careful of where you put your money for savings and always know if there would be penalties or taxes to pay for pulling money out to use.
- Avoid payday loans. They charge a lot in interest and fees to pay back and that is money you can't get back. It is bad to get into the habit of using them.