Frugal Mania

Surprisingly (at least to me), I get email from readers on a regular basis asking me for additional information on a post or even posing their own questions.  This is one such question that I found particularly topical for a post here at Frugal Mania:

Dear Frugal Michael,

I’ve been very good about using frugal ideas around the house and your recipes are the bomb!  I do have a question for you though.  My husband and I have been working really hard to get ourselves out of debt and we are finally in a position where we can start putting a little bit of money aside every month or whatever.  We want to start investing or saving but don’t really have a clue where to start except for maybe getting a savings account at the bank.  can you help?

Cynthia in Asheville

Dear Cynthia,

Thanks for taking the time to write!  I was in the same position recently and spent some time investigating my options for saving and growing my savings (both of which are important).  I actually closed my 401k because it wasn’t doing very well and I didn’t have much money in the account anyway.

I considered Certificates of Deposit but the rates are in the toilet – much like the economy is these days.  My grandparents grew their money quite well with CDs but at that time they were earning 14% or higher for a 12 month CD and I can’t get that sort of rate no matter how much I invest.  I do have an account at ShareBuilder and even have a handful of stocks  but the stock market is (you guessed it), in the toilet.  What to do?

The savings account at my credit union doesn’t have a rate of return that was appealing to me whatsoever, so I ended up opening an online savings account with HSBC, and I am now earning a respectable (at least in the current economy) 3.50% APY on my modest savings.

What I recommend is to look at how much you have to invest in savings and try to commit yourself to a set amount each month – even in that amount is no more than five dollars.  That money will grow over time, and with a savings account like the one I set up, you do have an ATM card that allows you to access the money in case of an emergency.

Whatever you decide, definitely start saving for a rainy day right away.  The longer you wait, the closer those rainy days may be!