Home > Articles > Business & Management > Finance & Investing

You and Your Money: Building Your Assets

You know you need to save and invest money, but how much, and where? Lois Vitt helps you figure it out in this chapter from her book, You and Your Money.
This chapter is from the book

14. Building Your Assets

You know about how much to put aside each month, but where do you put it? The financial advisors and others in your financial support network will give you specialized guidance to answer this question. To get your conversations going and keep them productive, there are some basics to keep in mind.

Ideally, the bare bones of your financial portfolio should be

  1. An emergency fund—a "comfort" fund equivalent to three or more months of expenses kept in a short-term, accessible savings account.
  2. Retirement assets.
  3. Your investment portfolio.
  4. Your home.

The mix depends on your individual goals. Once you define your goals, you have an idea of not only what they are, but how much they will cost. Are you saving for retirement, your children's education, or your own second career? Or is your goal to be financially independent by a certain age—60, or even 45? The structure and timetable of your particular goals will determine the best mix of your financial portfolio. If you are living in retirement, you will usually want your investments to be more heavily weighted in fairly conservative securities. If you are in your prime and planning on early financial idependence, you could be working with a portfolio that is heavy in high earning (and perhaps very high risk) investment products. In other words, there is no generic blueprint about what your financial portfolio should look like. Your plan is you; it will have your fingerprints all over it—your goals, your hopes, and your aspirations. But it will also be backed by sound, proven financial tools: cash accounts, stocks and bonds, and perhaps investment real estate too.

Money in the Bank—Climbing the Savings and Investment Ladder

If you have been a bank customer for a number of years, you may want to skip this section and go straight to Stocks, Bonds, and Mutual Funds, but if you are one of the millions of Americans who has only a checking account, (or no bank account at all) this section is for you.

No one knows how many people in the United States have no bank accounts. The Federal Deposit Insurance Corporation (FDIC) estimates that people who are "unbanked" represent 10 to 13 percent of all U.S. households. The Federal Reserve estimates that up to 10 million beneficiaries of Social Security have no bank account. In addition, there are uncounted millions of immigrant families who have no checking or savings account. By far the simplest and safest place to save money is in a bank or a credit union, not under the mattress or in a shoebox, even though a few frugal souls have been known to accumulate small fortunes doing just that. The FDIC is an independent agency of the U.S. government that protects you against the loss of your deposits, if an FDIC-insured bank or savings association fails.

Credit Unions function much like commercial banks, but they are nonprofit. Some are available to the public, but generally they are available through an employer or a specific industry, certain location, or university. Credit unions often offer depositors competitive services and more favorable rates and fees. The National Credit Union Administration (NCUA) is the federal agency that charters and supervises federal credit unions and insures savings in federal and most state-chartered credit unions across the country through the National Credit Union Share Insurance Fund (NCUSIF).

Commercial banks and credit unions insure your deposits up to $100,000 and both types of institutions offer a variety of accounts, depending upon how much you plan to set aside and how long you intend to keep your money on hand in an accessible form. One drawback to banking with a credit union is that you will not find branches in several locations as you might find with a commercial bank, but you may not need this particular convenience either.

Basic savings accounts work well if you plan to accumulate money for a short time only. For savings accounts, most banks do not have an initial minimum deposit, but they may charge a monthly fee if your account drops below a certain balance. You would not want to keep much money on hand in a basic savings account, since they generally pay very low interest rates (1–2%, if that much) so they should be considered only as a temporary measure. Basic savings accounts, on the other hand, can be ideal for you when you are just getting started on your savings plan or if you come into a small windfall, such as a gift or insurance payment, and you need time to decide just how and where you will invest your funds.

When choosing a bank or a credit union, choose wisely. First, compare rates and fees. While most banks are fairly competitive, there are some fluctuations. Then look at locations—is there a branch or office convenient to your neighborhood or workplace? Keep in mind that some people consider this convenience a bad thing. If you are concerned that you may be tempted to withdraw money, you may consider a bank in an out-of-the-way location and forgo an ATM convenience card. If you have a high T (Tangible) or M (Money) score and cannot resist a sale, or if you have a high S (Social) score and find it hard or impossible to say "no" to a family member or someone else in need, a less convenient bank might be right for you. That way, the trip to the bank will at least give you time to reconsider your motives for making a withdrawal. Finally, look to your values. There are large, regional and nationwide banks, smaller, community-oriented institutions, and even banks and credit unions that align themselves with social justice or environmental concerns. Your own values might make that institution a good match for you. The bottom line is that not all banks are created equally, so shop around to find the bank best suited to your needs.

A second type of saving vehicle is a money market account. These accounts require a higher initial deposit—usually at least $1,000—and you are required to keep a minimum amount in the account to avoid paying monthly maintenance fees. Although these accounts have the look of checking accounts, you are allowed a limited number—usually three—monthly withdrawals. A money market account, therefore, cannot replace your regular checking account. Money market accounts pay a higher interest rate than basic savings accounts, depending of course, upon market conditions. They are ideal for your emergency fund because, like basic savings accounts, they are liquid, so your funds can be easily withdrawn if circumstances warrant.

Certificates of deposit (CDs) are products that pay a fixed interest rate if you keep your money invested for a specific period of time. CDs are a one-time investment that pay interest until the CD matures. Most banks require at least $500 to open a CD, and you can get a CD for a term as short as three months or as long as 10 years. Generally, the longer the term, the higher the interest rate, but check carefully because there can be some variation, especially in markets where short and long-term interest rates do not rise and fall in their usual patterns. Generally speaking, however, a three-month CD rate is comparable to a money market account, and a six-year CD can bear interest at a rate that is three times that amount. Before the stated term expires, you will receive notification from the bank asking if you want to cash out the CD or roll it over into a new CD offered at the current rate. The good thing about these rates is that they are stable. Once you purchase the CD, you are guaranteed to receive the stated rate, no matter what happens in the rate marketplace. These products, however, come at a price in terms of flexibility. You will be charged a penalty, based on several months of interest, if you cash out the CD before the date the certificate will mature.

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.

Overview


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information


To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.

Surveys

Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.

Newsletters

If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information


Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.

Security


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.

Children


This site is not directed to children under the age of 13.

Marketing


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information


If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.

Choice/Opt-out


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information


Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents


California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure


Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.

Links


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact


Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice


We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020