Financial Security is Not an Impossible Task

Both are right.

The Bible talks about wise men leaving an inheritance for their children, and we all know the parable of the talents where the Lord rebuked the foolish man for not -in the very least- putting his one talent in the bank so that it could draw interest.

Any financial planner will tell you that you should ALWAYS pay yourself first. But how much is enough?

A good rule of thumb is 10%. If you start early putting aside 10% of your income and leave it alone, it will grow into a tidy little nest egg. If you can't afford 10% then start somewhere! $5 or $10 a week (or out of each paycheck) will grow steadily if you leave it alone.

Below are the most common ways to save toward a future of financial security and the advantages and disadvantages of each.

1). Saving Through Your Employer: One of the easiest way for many to save is having a deduction taken straight out of the paycheck. Most employers offer a 401K or some other type of savings. Advantage: Money comes directly out of your check so you don't miss it. Employer Matches you $ for $ up to a certain %. Money and interest earned is tax deferred, meaning you don't pay taxes on the money until you take it out. If you do leave employment you can roll this over into similar account, again deferring taxes and penalties. Disadvantage: If you leave employment, you usually stop earning interest on your money or you earn at a lower rate.

If your employer does not offer a 401k but your check is direct deposited into your bank account, then open a savings at the same bank and have the money withdrawn every payday with the goal to LEAVE IT ALONE! This savings should NOT be your emergency fund. If you only have one savings account to start that's fine, but as that account grows to more than $1000 (which should be sufficient to handle most types of emergencies) put the overage into a CD or some other type of higher interest account.

Also, some employers have a "retirement or pension" plan in lieu of FICA (or Social Security) Tax. BE CAREFUL WITH THESE! The fact that you do not pay in FICA taxes may disqualify you from receiving Social Security Disability Income should you become disabled before you reach retirement age.

2). Certificate Of Deposit (CD's): Investments in a CD can be as low as $1000 (in some instances $500!) and earn a fairly decent interest rate. This is one of the simplest ways to save toward financial security, especially if you just keep rolling it over - interest and all. Advantage: Safe, affordable, easily accessible should the need arise. Disadvantage: A CD will not earn money at the same rate as say, an IRA or some other type of "retirement" fund. But at least it's a start.

3). IRA: This is a fund that is tax deferred until retirement. Advantage: Usually available through your local bank. You don't pay taxes on the interest earned until you take the money out. However, if you are of retirement age, there are tax breaks and incentives. Disadvantage: The money is not easily accessible in an emergency and if you MUST take funds out of your IRA, you usually have a withdrawal penalty as well as tax penalty.

4). Stocks, Bonds, and Mutual Funds: These are some of the highest interest-earning ways to save money toward financial security. However, investments usually start at $5000 or more. Advantage: Normally pays a higher interest rate than other investments. Disadvantage: Most are in some part based on the stock market so you can risk the chance of losing your investment money. Be sure you understand what's going on with your money!

These are a few of the most common ways to save toward financial security. Parents, it's never too early to teach your children this lesson. Once their regular savings account reaches more than $1000, put that money into a CD and watch it keep growing. It is especially important for teens to learn this lesson once they start working, regardless of how much they make. Teaching them to live within their means will stave off high debt as they get out on their own.

When it comes to your financial security, be smart and be safe with your money!