Building savings is a great way to prepare for whatever life throws at you. But as market rates fluctuate, it’s important to develop a savings policy. Following the primary objectives of safety, liquidity, and yield—in that order–can help you avoid financial potholes.
Safety usually is the most important part of a savings policy because the asset is at minimal risk for loss. Insured funds, for example, are safe—and all your credit union savings are insured to $250,000 (certain combinations of accounts may be insured to even higher limits). The financial strength of the financial institution also contributes to the safety of your assets.
Liquidity lets you access your funds when you need them and provides an emergency reserve. You should be able to turn a liquid asset into cash on a day’s notice and without suffering a penalty, which can affect even a quarter’s worth of ordinary yield. Experts advise having three to six months’ worth of liquid assets in case of an emergency.
Yield, or rate of return, is the final component of a savings program. The yield will increase along with the length of your commitment to leave the funds in your account. That’s why share certificates—which you agree not to withdraw for fixed periods–earn a better yield than daily shares. The yield should be one element but not the primary reason for your savings decision.
WRCU offers several ways for you to save. Click on the tabs below for more information on the savings option.