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Savings Guide 2006

Start saving

  Sage advice on starting and maintaining a savings strategy.
Top 5 strategies for a lifetime of savings
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4. Avoid taxing situations.

  • Maximize your 401(k). Your 401(k) at work is likely to be the best investment around. In addition to using pretax dollars (unless you've got a Roth 401(k)), your employer probably matches a portion of your contribution. "Even if it's only a match that's 25 cents on the dollar, that's a guaranteed rate of return of 25 percent the first year," says Crossan. "At the bare minimum, people should invest up to the full match amount."
  • Use tax-advantaged accounts to help reach your goals. If you've maxed out your 401(k) at work, consider contributing to an IRA. Whether you choose a traditional or Roth IRA will determine whether you reap the tax benefits now or in the future. To save for educational goals, consider 529 plans, which will allow your savings to grow tax free.
  • Take advantage of flexible spending accounts. Health care has gotten increasingly expensive, but a flexible spending account, or FSA, is a tax-smart way to pay for such expenses. Families can pay for up to $5,000 in care -- tax free -- if they put it into a FSA. And that means more money to pay for the things you really want.

5. Don't go it alone.

  • Get a savings buddy. Whether it's a friend, a relative or a co-worker, find someone who will help you stay accountable and make sure you're spending your money wisely. "Once you've set a goal, they can help you stick with it and remind you to save consistently," says Andrée.
  • Make sure you and your partner on the same financial page. If you're frugal and your partner's a spendthrift, be willing to negotiate to make sure you both get what you want. "Look for ways to protect your own interests," says relationship expert and author April Masini. "Consider asking to have your needs met: 'I would really feel safe if I knew we put away 10 percent of our weekly income for a rainy day' is more of a problem-solving statement than 'Your spending is making me crazy,'" she says.
  • Pass it on. Good savings habits don't just benefit you -- they can benefit your children as well. By modeling good behavior, talking to your children about money, and teaching them that how to spend, save and donate their money wisely, you'll help the next generation prepare for their financial future. "Teaching your kids about money is easy to do, it makes so much sense, and it will benefit them in he long run," says Andrée.
Create a news alert for "savings" -- Posted: Oct. 1, 2006
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