Whether you are a current retiree or someone who is planning on retiring at some point in the future, there is probably some amount of concern over the best way to grow your savings. You could always continue to save money regularly as you have been doing, but the interest rates that most financial institutions pay will offer minimal growth in the long run. If you are looking for maximum growth in your savings account, it’s probably time to consider investing from the money you’ve painstakingly saved. Here are five smart tips on investing your savings.
1. Make Saving a Priority
One of the biggest mistakes many people make is to set aside money in their savings account after they’ve paid all their bills. In other words, it’s a hit and miss amount of what they have left over. If you want to have a savings account healthy enough to begin investing, make savings a priority.
2. Consider Investing in Dividend Stocks
Dividend stocks are a popular investment strategy for beginners because they pay dividends from corporate profits. These dividends are distributed regularly and they can be withdrawn to your bank account or they can be left in your holdings. There are many popular dividend paying stocks that regularly pay 6% or higher and these are the stocks you might want to consider first.
3. Let Earnings Roll Over
Since you’ve set aside a specific amount to deposit in your savings each and every month, your savings account will continue growing even with marginal interest. This is what you should consider. Your savings account will continue to grow but if you leave your dividends in the stocks you buy, they will accrue a much higher interest rate than your financial institution will pay out.
4. Continue Buying High Yield Dividend Stocks
Although you will be, for all intents and purposes, buying more stocks with the dividends you let roll over, you can also assess which dividend stocks are performing best. At this point, it would be prudent to continue buying more from your savings so that you will be growing your portfolio. By doing this you will be literally buying twice as many stocks because you will be using your dividends to buy more and your savings to buy as well.
5. Only Use Dividends for Emergencies
Unless it is a dire emergency, it is advised that you leave your dividend payment in your stock account. Only withdraw those dividends if there is no other way to handle a financial emergency. It is important to understand the difference between wants and needs. Altogether too many beginner investors buy major purchases that are unnecessary.
They’ve accrued enough money to purchase a new home, for example, but is it necessary or are they simply looking to relocate to a trendier neighborhood? If something is still serviceable, do you really need to upgrade? Letting that dividend work for you makes a whole lot more sense. Real estate devalues over time, but high yield dividends with a history of growth continue to also grow your financial future.
Although there are other investment vehicles like CDs and high interest savings accounts, you will find that there are few investments as practical as dividend paying stocks. When times are bad you have that income, if necessary, but in ‘normal’ times, that money continues to grow for you.
Doesn’t it make sense to invest in something you can withdraw from if needed without losing the underlying value? Check out the highest paying dividends that have a history of performing well and that’s where you should start investing from your savings.