It’s been two weeks (and a few days – sorry about that) so it’s time for our next money mistake to avoid. Last time we talked about not saving from as early as possible. Hopefully if you weren’t saving before you read the last post you are now.
Mistake #2: Locking away all your savings.
‘But Ms. ME didn’t you tell me last week to open a Roth IRA? Once the money is in there I can’t touch it until I’m retirement age.’
Yes, yes I did tell you that last week. But I did not tell you to put ALL of your savings in there. Let me be clear and restate this comment from the last post.
“Once you have a couple of hundred dollars in that savings account it’s a great idea to go ahead and open a Roth IRA at an early age.”
Notice I said “a couple of hundred dollars” and then I reference opening an IRA with only $100 of those dollars. The remaining funds should stay in your savings account. You never want to lock away ALL of your savings in any account that restricts you from accessing it. In the context of the last post, we were encouraging parents to start savings accounts & then IRAs for their children. From that point on split your saving for your children between the two accounts. If you desire to earn a higher interest rate, using some of the funds from the savings account to open a certificate of deposit can be a valuable option.
Once your children become independent, these initial savings accounts can serve as their emergency funds for when life happens. That way instead of calling mom & dad for help immediately, they can first turn to the help mom & dad have already given them by getting their savings started early.
For everyone who started saving since the last post, the basic advice is don’t put it all away in an inaccessible savings instrument just for the higher interest rate. The trade-off isn’t worth it if you end up having to resort to using credit in an emergency situation.
ECV Talks 
I personally find it’s best to get out of debt first and then work on building up an emergency fund. After those two tasks are accomplished, it’s time to invest.
Great point! I’ve been asked the question which is best to do first, save or pay off debt. In most cases I say debt first also. The savings in lower interest payments alone make debt payoff a priority. In fact that is the topic of an upcoming post.
The angle I’ve been taking with these posts is parents setting their kids up for financial success from an early age. Hopefully most kids don’t have debt & can avoid it if their parents save for them from birth.