Personal Finance Articles

Many of us are aware that an emergency cash reserve is a necessary component to the implementation of a successful financial success system. This cash reserve is to be used for rare emergencies, such as a sudden job loss, a broken washing machine, or serious car accident. But what if I told you that you could transform this cash reserve into a gold mine that could greatly enhance your nest egg at retirement. Would you believe me? Well, it’s true! Just follow the simple steps outlined below:

1. Open Savings Account Online – The first step is to open a high interest savings account online. You can currently improve your interest rate from the local bank’s rate of around 0.5% to 5.25% by using online banks such as WT Direct. To learn more about these high yield online savings accounts, click here. If you hold an emergency cash reserve of $10,000, you would earn an extra $475 annually. This makes for a nice sum to begin an investment program for the future.
2. Open Low Cost Brokerage Account – The next step is to open a low cost brokerage account to invest your newfound money. One terrific option is to open an account at Zecco, which stands for zero commission costs. Basically, Zecco allows you to purchase stocks for free, with zero account maintenance fees and no account minimums to get started. A truly fantastic solution! To learn more about Zecco, click here.
3. Invest Interest From Savings in the Stock Market – Now that our accounts are set up, we will begin a process of transferring the interest we earn on our emergency cash once a year to our low cost brokerage account, where we will purchase shares in the total stock market ETF, symbol VTI. Over the long term, VTI should return around 10% annually. This process should be repeated until you reach retirement at 65 years old.
4. Allow the Money to Compound – Now that we have our investment program started, all we need to do is watch the money grow. Not literally, and certainly not every day or every week. We just need to keep an eye on our system and continue to invest our savings in the stock market annually. To give you an idea of the potential this program offers, look over the following example. If we start this program right out of college at 22 years old and continue the program until we retire at 65, our annual $475 investment in VTI shares should grow to over $281,000! The best part is that this program does not require you to save any extra money or change your spending habits whatsoever. It only requires you to invest the superior returns you are now receiving from your emergency cash reserve in the stock market. A pretty simple process, don’t you think?

In summary, your emergency cash reserve can be converted into a true gold mine by following four simple steps: (1) open savings account online with high yield, (2) open low cost brokerage account that allows purchase of stocks and ETF’s, (3) invest the earned interest from your savings account in the stock market, and (4) allow compound interest to work for you. Over the course of your working years, this invested money will accumulate into a substantial sum. So start the process of securing your financial future today, and allow compound interest to begin working for you.