Thursday, March 13, 2008

Dunk that 10% for better living

[Daniel Costello on Finance] Dunk that 10% for better living
The Korea Herald, Wednesday March 12, 2008

Mae West said, "Saving love doesn't bring any interest." Saving money, however, does.

The largest risk associated with saving money -- is not saving any money. There are a lot of unwise things people do with their savings. Imagine foolishly stocking idle bills away under your mattress? Your cleaner might find them there, or you might even forget how much was there in the first place!

As you continually double check your mattress-stuffed savings plan (MSSP), or the ever-popular freezer-filled savings plan (FFSP), you are losing interest that would have otherwise added to your savings. Some people stuff hundreds of dollars into the back of their freezer, or even thousands or more. But, why?

A plethora of banks exists in Korea, each providing savings accounts with guaranteed interest rates on certain minimum fixed amounts over periods ranging from months to years. All have higher rates of interest than your freezer.

These ensure you leave it there. I have heard one of the best guaranteed rates may be found at Nonghyup Bank, where some people might like to count their fingers upon exit. Even a low rate of interest on your savings anywhere is better than none at all, particularly if you are seeking the lowest risk investment you might make.

A savings account would be a first step in that direction. Your biggest challenge is coming up with the spare change to fill that savings account, especially if your sole purpose in life is now focused on paying off debts.

David Chilton, author of "The Wealthy Barber: The Common Sense Guide to Successful Financial Planning," gives advice on the topic of savings plans. Start by diverting as little as 10 percent of your monthly income into a savings account. While this might seem like a lot to divert from your daily living costs, if engaged in with regular frequency you may see a tangible benefit and sizeable savings at the end of as little as twelve months.

Chilton reassures readers that a habitual over-spender will not actually miss that 10 percent of monthly income if it is transferred automatically after payday.

Most people save as little as 2-3 percent of their income annually in developed nations, and it is easy to see why that figure is so small with the number of credit cards most people carry these days. A recent PBS Frontline special on credit card debt revealed that the average American carries eight credit cards -- swallowing up a great deal of potential savings.

If you have more than one or two credit cards -- that's too many credit cards.

Keep your favorite one or two and cut the rest up.

Mae West also said: "You only live once, but if you do it right, once is enough."

So divert 10 percent at least once a month for your introduction to savings on a tight spending budget. You'll never miss it if you never had it and that little pot of gold will soon occupy at least part of your expanding financial planning mind.

Koeran banks and one-year fixed-term deposit interest rates

Daegu Bank 5.6%

Jeju Bank 5.45%

Shinhan Bank 5.4%

Suhyup 5.4%

Woori Bank 5.29%

Kookmin Bank -- 5.25%

Nonghyup 5.25%

Kwang Ju Bank 5.1%

Industrial Bank of Korea 5.08%

SC First Bank 5%

HSBC -- 4.8%

To contact Daniel, visit his website at -- Ed.

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