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How to Become a Saver

Nancy Trejos

Today, we're going to talk about ways to save money. I asked Richard Barrington, the primary spokesperson and personal finance expert for, which examines rates on bank accounts, for his views. He is also a freelance writer and novelist who spent over 20 years as an investment industry executive. Here's what he had to say:

Yes, the recession is dragging on, the stock market is sputtering again, and interest rates are low. It's an era of diminished expectations, one where we have to return to the basics like saving more money -- which is about as fun as being told to eat your vegetables.

However, we're not quite going back to the simplicity of "a penny saved is a penny earned." Feeding your savings account can help you build a little more financial muscle than you might think.

Let's talk about those low interest rates on your accounts. A 2 percent interest rate with 1 percent deflation these days is worth as much as a 6 or 7 percent interest rate was under normal inflation conditions. You wouldn't say no to 6 or 7 percent, would you? Because most of us have never seen deflation before, we have to readjust our thinking. Do the math and you'll see it's true: 2 percent is the new 6 percent.

Also, because the limit on FDIC deposit insurance has been raised to $250,000 through the end of 2013, it gives you more opportunity for pooling your deposits with one bank. Why is this important? Because banks often offer fee waivers and/or higher interest rates to large depositors. So, as you accumulate money, make sure you use that additional financial muscle to get better deposit terms.

Naturally, building muscle depends on a steady diet, so here are some tips for feeding your savings account:

Create a regular spending plan, and pay into it just like paying a monthly bill. Direct deposit programs can help make this happen.

Minimize the amount you keep in checking. Don't push it to the point of overdrafts -- these are becoming increasingly expensive -- but don't allow excess money to build up in an account that pays little or no interest.

Use an Internet resource to shop for the most competitive rates and terms on savings accounts -- and look for those special offers on larger accounts, if you have that kind of money available.

Shop online for coupons -- but only after you've decided what you need to buy. Coupons are a form of advertising -- they are trying to prompt you into buying something you otherwise wouldn't. Turn this around by deciding what you want first, and then using coupons to get a discount on things you would have purchased anyway.

Never go shopping while hungry. This classic piece of advice has never been more important, what with so many grocery stores offering tempting, ready-to-eat delicacies. Avoid these extra indulgences, and you can feed your savings account rather than your waistline.

By Nancy Trejos  |  July 15, 2009; 7:01 AM ET
Categories:  Nancy Trejos  
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I would add to his comments--if you want to *become* a saver, but think you can't afford to save, start with a small amount. Starting with a larger amount would, of course, be better. But if you think you can't afford to save anything, $15/month is better than nothing. And at the end of a year, you'll probably see that you are able to save $30 or $50. And don't forget the old living below your means. If you get a raise, figure out how much that will increase your take home pay and set up or adjust your direct deposit to automatically put the entire amount of your net raise into savings or investment. Next time you get a raise, do the same thing.

Posted by: janedoe5 | July 15, 2009 11:34 AM | Report abuse

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