Investing 101
Before you start investing or creating an emergency fund you need to be Debt Free. As long as you are in Debt that charges double digit interest rates it your best financial move to remove that burden so you can change direction, one toward Wealth.
Once Debt Free what to do with all that money you are no longer making someone else rich with? Make yourself rich, or at least create Wealth for yourself.
This is not a comprehensive or complete list of investments. Before making any sort of investment do some research to better understand any risks or benefits.
How to start investing
Savings Account
Even though they do not earn much interest for you they are a great place to start any savings. As the amount of money grows think about moving it to higher interest savings accounts, either in other banks or to a money market account. High-yield savings accounts do exist often paying around 3% interest, but some require a higher initial deposit to open an account. That's Ok, you'll be opening one in no time.
Money Market Account [MMA]
These accounts are a blend of savings account and checking account earning a higher interest rate than either. These accounts are ideal for keeping an Emergency Fund for whatever may come up in life: car needs repair, the hot water heater springs a leak, seware line need clearing, and so on.
Two important things to be aware of, 1) the initial deposit to open an account is higher than a savings account, and 2) you are limited by the number of withdraws each month and year. Two things that can be easily worked around and in most circumstances pose no problem.
Certificate of Deposit [CD]
This is a debt instrument, but don't worry, they are FDIC insured. CD's can be for as little as three months up to five years. Once you open a CD the account is closed and the interest rate it earns is fixed until it matures. These are a great investment if you don't need the money for a period of time.
Treasury Bill
These are backed by the full faith of the U.S. government. There are two types: treasury bills which mature in less than a year while treasury notes mature between 2 to 10 years. They are considered a safe investment and can be bought directly at Treasury Direct without any sort of commission.
I-Bonds
These bonds are a savings bonds issued by the U.S. government which is adjusted semiannually to keep up with inflation to protect the purchasing power of your money. These are also backed by the full faith in our government.
Bond Mutual Fund
These are mutual funds which pool money from investors buying a variety of bonds averaging the return on investment. In the event one bond fails the whole fund is not effected, spreading out the risk while minimizing losses so you don't lose everything.
