by Amy Sullivangreiner

Created on: December 04, 2005   Last Updated: July 12, 2011

Always attend to the basics first. Here are the first-level basics:

1. You need an emergency cash fund. This will keep you from being forced into debt. Depending on your circumstances, stash something between three months (young, single, healthy, stable job) and one years (older, married, children, some health issues) salary in a simple savings account. It won't earn great interest, but it's always immediately accessible when you need it.

2. AVOID DEBT. A good rule of thumb is to avoid borrowing money for a depreciating asset, like a car. (A house, on the other hand, is an appreciating asset, or investment. Personally, I also classify student loans as investments.) If you must use a credit card, don't use it again until you've paid it off.

Now, second level stuff: What are you investing for? For most people, that's retirement. If your employer has a 401k or 457 program, go for it; they're about the best deal around, since the employer will match some or all of your contribution. You can also set up your own IRA; they come in a couple of different forms (Simple IRA, Roth IRA,) and your banker can help you decide which will best suit your circumstances. You can contribute not less than $2000 a year to these; the allowed amounts go up as you get older.

Another simple way to stack up money is Certificates of Deposit (called CDs), US Savings Bonds, or US Treasury Bonds. (The T-Bonds require much larger investment to start with.) For accurate and current information on the bonds, go to the US Treasury web site: www.ustreas.gov

For Certificates of Deposit, go to your bank or credit union. They can tell you what denominations they sell them in, what the required time frames are, and what the rate of return is. Hint on CDs: when rates are rising, you want to hold them for a shorter time, so you can roll them over sooner into a higher rate; when rates are falling, you want to hold them longer.

All of the above are relatively low-risk, low-return strategies. The basic equation of investing is higher potential return equals higher risk; lower risk equals lower return. For someone who is just learning, probably better to stick to the safer end.

Read everything you can to educate yourself. Read books, read the financial papers and columns, and talk to people you know who are knowledgeable. You'll get there, and you'll learn when to check into something more thoroughly before you invest.

Good luck to you!

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