Navigating the world when you have money


Wouldn’t it be fabulous to be independently wealthy and travel the world on a whim, buy every luxury car you’ve ever dreamed of, or go shopping for the afternoon…in Europe? OK, let’s stop before this gets depressing.

Why you need a savings plan 

Even if you only have an extra $100 stored away in an old hat, it’s important to have a savings plan in place for the times when you don’t have money (for something more reliable than an old hat, check out the shoebox budgeting in chapter 3). And though it’s difficult to see when you’re in the trenches of day-to-day living, there’s that wonderful ship on the horizon calledretirement. Retirement is when you decide you don’t want to work anymore, but still want to do fun things with your life. Your retirement savings plan will pay for those things when you no longer have regular income from a job.

The simple stuff

Day after day, as you live your life, you need a place to put the money you make, pay for the stuff you buy or use, and save whatever money is left over.


Think of a checking account like the waves hitting a beach: money flows in from paychecks, and money slides out for purchases. It makes very little or no interest because it really is just a holding account. You can use those funds by making a withdrawal at your credit union branch, using your debit card at an ATM, using your debit card for a purchase, or writing a check.


share savings account is the first account you’ll open at a credit union. You’ll deposit a nominal fee (usually $5) to buy your share of ownership. Share savings accounts are often called share accounts, regular share accounts, or regular savings accounts. Don’t be confused. It’s kind of like what different parts of the country do to the names soda, pop, and soda pop—same thing, just a different name. 

You’ll open a regular savings account to put the extra money into after you’ve paid your budgeted expenses. There are a range of savings accounts to choose from, each with different features that meet the specific savings needs you might have. Once the amount of money in your savings account reaches a certain level, you may want to invest it in something that will earn you a higher interest rate. Visit your credit union for great advice on how to make this money really grow!

Planning for retirement 

It’s not easy to figure out how much money you’ll need for your future retirement. If you have a full-time job, family and home, you should probably sit down with a credit union financial planner and make a plan. Consider these questions before you go in: 

  • What lifestyle do you want when you retire?
  • How much do you make today?
  • Does your current employer offer a pension plan? 
  • What can you expect to collect for Social Security?
  • What age do you hope to retire at?
  • How aggressive do you want to be with your saving right now?

The 411 on a 401(K)

A 401(k) is a retirement savings plan sponsored by your employer. It allows you to take a portion of your money from your regular paycheck, deposit it in a retirement savings account and earn interest that is tax-deferred. Sometimes employers contribute funds as well. If your employer offers contributions and/or “matches” to your account, this is basically free money that you receive just for saving. A 401(k) is meant to be a savings vehicle for retirement that is sheltered or exempt from taxes. Withdrawing any money from this type of account means you’ll pay taxes as well as a penalty.

IRA showdown

IRA stands for individual retirement account. An IRA allows you to save money towards your retirement in a separate account, instead of in your standard savings account. Various tax advantages associated with these accounts can help you make the most of your education and retirement savings. There are two kinds of IRAs: Traditional and Roth. Here is a quick comparison:


  • Who can open one? Any credit union member under 70½ years old, earning an income.
  • What is the contribution? Currently, it’s up to $5,000 each year, or 100% of your income, whichever is less. Check with your credit union.
  • What about dividends? Calculated daily and paid quarterly into your account. 
  • How do the taxes work? Taxes on contributions are deferred until retirement.
  • Do I have access to the funds? Yes, to contributions; no to withdrawing interest earnings unless you want to pay a penalty.
  • What happens when I retire? Required minimum distributions will start at age 70½.


  • Who can open one? Any credit union member earning an income.
  • What is the contribution? Up to $5,000 each year.
  • What about dividends? Calculated daily and paid quarterly into your account. 
  • How do the taxes work? Contributions are after tax, so no tax is assessed at retirement.
  • Do I have access to the funds? If open for 5 years and certain conditions are met, you have tax- and penalty-free access to funds.
  • What happens when I retire? Earnings can grow until you’re ready to take a distribution.

For more in-depth investment advice, talk to your credit union representative. For guidance on taxation as it relates to your specific circumstances, ask your credit union representative to refer you to a tax advisor.