I don’t normally write about the finance books that I read, but George S. Clason’s “The Richest Man in Babylon” has some really sound financial principles that I want to pass along. It’s a tiny little book, only 140 pages and since it’s older you should be able to pick it up at your library or on Paperback swap if you want to read it yourself.
“The Richest Man in Babylon” is the story of Arkad, a man who started out as a simple peasant and has now become extremely wealthy. From his castle the king of Babylon sees the poor in his country continue to suffer as they mismanage their resources. He asks Arkad to teach the citizens the secrets to achieving financial security.
The lessons Arkad teaches them he calls the “Seven Cures for a Lean Purse”. While they are not revolutionary, their simplicity makes them very valuable information.
Cure #3 – Make Thy Gold Multiply (A Frugal Chick’s Translation: Make Your Money Work For You!)
So now that you have cut back your expenses, your purse is getting a little bit fatter. You are sleeping better because you know if you car breaks down you can pay cash for the repairs. But that money tucked under your mattress isn’t growing. It’s time to earn some interest.
The safest suggestion: an interest bearing savings account at a federally insured bank (FDIC) or credit union (NCUA). Check Bankrate.com and you can compare both online and local banks’ rates. Or if you like the bank you are already using, stick with them. By putting your nest egg in an insured savings account (make sure to check withdrawal conditions) you will have access to your money when you need it.
If you want to lock it in for a certain time period (they will get you with penalties if you take it out early) Certificates of Deposit, or CDs, are a great option. You can also compare CD rates on Bankrate.com. Make sure you check the term and the penalty amounts, but some banks you can get CDs for terms as short as 3 months.
There are dozens of other options for this and I am not a financial advisor, so I would suggest you contact someone trustworthy who works with money professionally and ask them. A financial advisor is a very valuable tool and a great lead in to Cure #4!