I have definitely learned the importance of saving my money with my latest engine debacle, and the best ways to do it. I am going to share what has worked for me.
First, you have to "pay yourself first." No matter how in debt you are, no matter the bills, you have to save something every paycheck. Start with 10% off the top, before you do anything with your money. I am up to about 30% now.
If you cannot save at least 10%, you should probably look at making some lifestyle changes, or job changes. No one should be in the position where they cannot save $100.00 out of every $1000.00 made. You may have to forgo some things, such as cable, a gym membership or a new car. But there are alternatives and you may get more out of life.
Second, you need a good place to save it. Normal banks don't pay anything, with the exception of Washington Mutual's internet savings account which pays 5% currently with no fees or minimums when attached to a checking account. But do not expect this to last. I have only been using this savings account for a month or so so I can't say much about it. But normally, banks are fee ridden and pay less than 1%.
The best deal is ING Direct. Email me here and I will get you a referral. They will give you $25.00 for opening an account with $250.00 and I will get $10.00.
They have an outstanding line of checking and savings products, as well as other investments. First, both the checking and savings accounts have no fees and no minimums. The checking account pays about 4% on any balance, plus cash back on purchases for a limited time. The savings accounts pay almost 5% on any balance.
The checking account is outstanding in the fact that it carries a $250.00 overdraft limit with no overdraft fee. That's right, there is no $30.00 overdraft fee like you'd find at other banks. You simply pay an APR on the balance owed for the month. I overdrafted last month for a few days, a costly mistake at any other bank. But at ING direct, it only cost me $0.04. Yes that is correct, four cents. I had a problem with overdrafting that cost me thousands of dollars over the years, but not anymore.
There is bill pay which can be used to pay a business or a person. You get a Mastercard/debit card which can be used free of charge at thousands of ATM machines or to make purchases. You can make deposits using mail, transfer from your linked account (my account at WAMU is linked) or direct deposit. They don't have branches, which allow these outstanding deals, but may worry some. However, I've been using them for 3 years now with no problems at all. Think of how many times you really had to go into your bank. I have left my wamu account open for one payment a year...to the IRS and I'm sure that can be worked around as well.
Now that you have a great company to save with, you've made your lifestyle changes and paid off some bills, you can start saving small amounts in other, higher paying investments.
I use ING direct to invest in an IRA and a mutual fund. I consider the mutual fund longer term savings, because mutual funds tend to make money over the long term, but it's still fairly liquid, which means I can sell the shares and get my money back.
The IRA is retirement savings, or long term. I chose a Roth IRA because I would rather pay the tax on the contributions now than later in life, considering the government's history of taxing people. I was able to chose the mutual funds I invested in with ING Direct.
I hope this advice helps someone like it helped me.