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Focus Today on Saving for Tomorrow: Five Things to Know Now

July is National Sandwich Generation Month, a reminder that there’s no better time than now to start saving for your future. Careful financial planning will help ensure that you have enough savings in case you find yourself needing to take care of children and parents simultaneously. Saving also protects you from having to rely on your own children as you grow older, thus breaking the cycle of sandwiched responsibility for future generations.

Finding money to put into savings can seem difficult, but there are some strategies that can make it easier. Start now, by asking yourself these five questions…

Do I have savings goals? Knowing how much you want to save and why can help you stick to a plan.

For example, if you have a young child, ask yourself if you plan to help pay for college. Research indicates that children who have a college savings fund are more likely to go to college than those who don't. Start by looking at "529 plans" sponsored by your state (typically with cost and tax benefits for residents) and compare them to other 529 plan options. Learn more about college planning at http://www.studentaid.ed.gov/prepare-for-college.

How can I spend less? Review how much you spent in the last month and consider ways to cut back. Begin by reviewing recurring expenses — even small ones — and determine what you might be able to cut out, downgrade, or find a better deal on elsewhere.

Also try to pay less in interest. For example, if you have multiple loans, pay off the ones with the highest interest rates first. And, regularly reviewing your credit report and correcting errors can result in considerable savings on loans and insurance policies.

Do I have an emergency savings fund? Financial experts generally recommend that you have at least six months of living expenses in a federally insured product, such as a savings account or a certificate of deposit (CD). The idea is to help you withstand a major reduction in income, such as from a job loss, or to pay for a major, unexpected home or car repair. To build your "rainy day fund," consider a combination of regular, automated deposits and any "windfalls" you receive, perhaps from a tax refund or a bonus at work.

How much investment risk am I willing to take? Investments such as stocks, bonds and mutual funds can produce higher returns than bank deposits over many years, but you could also lose some or all of that money. (Remember, non-deposit investments are not insured by the FDIC against loss.)

In general, the longer you plan to keep money invested and the greater your tolerance for volatility, the more likely these investments can help you reach your targets.

Am I saving enough for retirement? For many, the answer is "no" even when they think it is "yes." Options to save include workplace retirement plans, Individual Retirement Accounts (IRAs) offered by many banks and investment companies, and the U.S. Treasury Department's new "myRA" (MyRetirement Account) program.

The myRA account is a simple, safe and affordable retirement savings program that is backed by the U.S. government. Savers can open an account with as little as $25, there are no fees, the account will earn interest at a variable rate, and the investment is protected so the account balance will never go down. To learn more about myRA, go to http://www.treasurydirect.gov/readysavegrow/start_saving/myra.htm.


The opinions expressed in this newsletter are those of the author and may not reflect those of The Washington Trust Company. The information in this report has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. Any opinions expressed herein are subject to change at any time without notice. Any person relying upon this information shall be solely responsible for the consequences of such reliance. Performance is historical and does not guarantee future results.

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