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It’s easier than ever to start a savings plan, whether you're putting away money for retirement, a vacation or an emergency. All you have to do is decide what savings vehicle is right for you.
Not so long ago, banks, mutual funds and brokerages would demand that you pony up $1,000 or more to open an account, or to get a higher yield. Some still do, but the number of banks that require no minimum deposit to get high yields is growing.
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Most of those institutions also offer automatic investment plans, sparing you the annoyance of having to write checks to your savings account every month. The financial world is glad to open an account for you, even if you have very little money, and tap your other funds on a regular basis to help it grow.
Even better, you can now get a bit of interest on your savings, as opposed to nothing, which had been the case the past several years. The average one-year yield on a bank certificate of deposit, for example, has doubled in the past year, according to Bankrate.com. (That comes to about 2 percent but still: better than 1 percent). Some savings accounts are yielding 2 percent as well.
Your choice: where to put your money, and how long you plan to keep it there. Typically, you earn more the longer you lock up your savings. You also earn more if you’re willing to take more risk.
Barriers falling down
A decade or so ago, if you wanted to earn the top interest rate a bank had to offer, you had to bring serious money to the table — sometimes as much as $100,000. Today, you’ll still get more love — and interest — from your bank if you come with $100,000, but you can also get top yields at some banks that have no minimum-deposit requirement.
Mutual funds, brokerages and banks too have been lowering fees and minimums for the past decade. The reason? Competition, says Christine Benz, director of personal finance at Morningstar, the Chicago investment trackers. “For the past decade-plus, investment providers have been locked in an arms race to lower fees and lower or remove investment minimums,” she says.