Saving For the Future 101

First, open a savings account. Consider using a credit union. You only need $5 to open an account and credit unions generally offer higher savings rates and low-interest loans. Wherever you choose to put your money, be sure that your account is at a federally insured institution.

Next, keep socking the cash away, even if just $10 a month. If you have a job, talk to your employer about direct deposit to have a portion of your paycheck automatically deposited into your savings account every payday.

If you'd rather save the old-fashioned way, try writing yourself a check every time you get paid and put that into savings. If you don't have a checking account, it's time you open one. Some checking accounts offer interest. Remember, statistically, people spend less when using a checkbook than when they carry cash. Think about it … how fast can you spend a $20 bill?

There's no magic in the way savings accounts work. Just put your money in and try not to touch it. Meanwhile, you earn interest. Depending on the type of account, interest rate and how your interest is compounded (added up when applied to both the initial savings plus the interest you're earning on the savings) tells you just how much you can expect to earn.

There's more than one type of savings plan. If you need to access your money, a basic savings account is probably best. To earn higher interest, try a certificate of deposit (CD).

You can choose a short three- or six-month term, or a one- or two-year term, or longer. Opening a CD means you agree to put a certain amount of money into this savings account and not touch it for a specific length of time. At the end of the term, you can choose to let your money stay in for another term or take your money out. But the only way to keep earning a higher interest rate on your savings is to keep the money in the CD. The longer the term, the more you earn.

A savings account is a good first step toward a brighter financial future. As your money grows, you can invest it. Investment accounts give you higher interest than savings accounts and are designed for the long term:

• Start with a 401(k) plan - Entering the workforce has its perks. One is the 401(k) plan, which most companies offer. While you may not be thinking about retirement yet, it's important to start putting money away now. The earlier you begin, the easier it is to keep it going and the more you save over time. Usually, the company matches a portion of your savings from every paycheck, and the funds are taken out of your check before taxes. That means you end up paying less in taxes.
• Individual Retirement Account (IRA) - There are different types of IRAs. You can open a traditional IRA (which may provide a tax deduction) or a Roth IRA (which provides tax free earnings).* Even though IRAs are intended for retirement, some can even be used to make a first-time home purchase.
• Buy Stocks - When you buy stock in a company you're buying a little piece of that company. You can earn a lot, but you can also lose a lot, depending on how the company is doing.** Be cautious.
• Open a Mutual Fund - In a mutual fund, you pool your money with other members' funds to invest in a group of stocks and bonds. Mutual funds are generally less volatile because you don't have all your investments in one stock or company.** Plus, your funds are managed for you. Again, be cautious.

Whether you're saving for the here and now, for an after-graduation Euro trip, a home or even retirement, opening a savings account is the smartest first step. Remember, the sooner you start, the more you can save.