By Audrey Arkins, Correspondent, Salary.com

"By any way you measure it, Americans are poor savers," said Don Blandin, president of the Washington, D.C.-based American Savings Education Council. "We need to look at the many Americans who are struggling paycheck-to-paycheck and need incentives to put something aside."

William Gale, a tax specialist at the Brookings Institution in Washington, D.C., says the situation isn't as bad as it seems. Gale considers it a mistake to view America's much bemoaned negative savings rate without factoring in capital gains (which are not counted as savings) as another important indicator of wealth accumulation.

Federal Reserve Chairman Alan Greenspan recommends that everyone save 10 percent of annual earnings. In reality, the amount Americans save and where we save it hangs on personal factors like age, family obligations, lifestyle versus income, and so on.

"At a beginner's level, it doesn't matter how much we save as long as we do it. It's never too early - or too late - to start," said Joe Newman, a teacher at the Alternative Learning Center in West Los Angeles, Calif. "I try to persuade the kids that saving even a few bucks a month is worthwhile, as long as it gets them into a habit they learn to stick with." Unfortunately, not everyone learns these lessons early on.

Whether it's ten dollars a month or five hundred, it's important for savings actually to earn returns. Personal finance analysts don't recommend putting money in a regular savings account. In fact, The Motley Fool is emphatic that "there is virtually no use at all today for the inappropriately named 'savings account', yet it remains one of the most popular ways for Americans to store their money." The majority of savings accounts yield about 3 percent less than what is regularly available from equally insured and convenient accounts.

Money market accounts
Money market accounts (MMAs) first appeared in 1982, when interest rates as high as 10 percent were up for grabs. Alas, today's MMAs are far less lucrative. Rates earned in Money Market Accounts are variable, meaning they change daily. According to bankrate.com, the average yield for an MMA was 4.80 percent in early February 2001. MMAs are just a step up from a regular savings account and even give depositors check writing privileges, although usually only about three checks per month. If you anticipate writing more checks, beware of hefty fees which can eat up the gains on interest rates.

Certificates of deposit
For those who've built up a sizable stash of savings, which they expect not to have to draw on anytime soon, a certificate of deposit (CD) looks like a wise interim resort. With the purchase of a CD, a saver locks in money for a specified amount of time ranging from one day to several years, depending on the instrument. The longer money is left in, the higher the interest earned.

Yields are higher with CDs than with MMAs and they consistently outperform regular savings accounts. A one-year CD averages about 5.56 percent, according to bankrate.com. The downside of a CD happens if you need to cash out before the end of the agreed term. Then you get slapped with a hefty penalty and in some cases could even walk away with less than the original principal. But those who wait until the CD matures earn a reasonable, secure, fixed rate of interest (unless they bought into the less common, late CD with variable rates).

Interest earned on CDs reflects Treasury Bill rates (those offered by the Federal Reserve when they issue Treasury obligations, a.k.a. the debt of the federal government). If the two-year Treasury Note is paying a good rate, then CD rates will reflect that, and vice-versa. When rates are down, shorter-term CDs are recommended until the rates improve. While shopping for a CD it's possible to look beyond the local bank to a credit union or savings and loan, which often offer better deals. According to bankrate.com, the best current rates are available with online banks.

How people save their money is highly influenced by what they save for. MMAs and CDs are useful for shorter-term objectives, such as buying a car or building a down payment for a house. What you see is what you get with an MMA or a CD. They're hardly exciting investment vehicles and they definitely won't provide any get-rich- quick incentives, but they are secure.

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