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| *Ostroff, Fair and Company>>>Investing |
Financial question. Does it worth the effort for a salary earner to keep $20000 in a savings deposit account ? |
What is the best means to invest $20,000 as a salaryman? Unless you have an ENORMOUS salary, it's a bit crazy to have $20,000 sitting in a savings account! You need 3-6 months salary in a high-interest savings account for emergencies, and beyond that, your "savings" should be in investments that suit your age, risk-tolerance, and ultimate financial goals. If you keep $20,000 in a typical savings account paying 4% it will be worth $53,000 in 25 years. If you put in in an "average" broad market mutual fund earning a net 10-12%/year over the next 25 years, it'll be worth $250K! Depends how soon you want access to the money. There are better investments than a deposit account. Also how much risk you want to take. It depends on your expenses. You should total all your expenditures (food, gas, mortgage, etc) for 1 month then multiply that by 6. This is what you should have easily accessable. This should be used only for emergencies. (car trouble, Furnace broken down, etc) When you use some of it you need to replace it as fast as possible. After that you should invest the rest. The investements should be based on your preference, with regards to risk. when investing as a novice i would choose a Mutal fund of some type. you can get a 10 to 12% return in a good safe mutal fund. You should check out Daveramsey.com and listen to him on the radio he has alot of good advice. It all depends on your age, whether you have a home or not and what your current salary and future salary expectaions are. If you are under 30 definetly investing long term in the market is worthwhile considering. in any case if time is not an issue investing in the market is a good bet buy a house with it. You should have an emergency fund of 3-6 months living expenses. You could have a larger or smaller emergency fund depending on your individual situation. This money should be in a low risk investment, such as high yield savings account(money market) or short term U.S. treasuries. If you decide you can invest this money look into funding a 401K through your employer to take advantage of any possible employer match, or set up an IRA or Roth IRA. |
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