I’ve been swamped lately. As a result, the reader questions have been piling up. There’s a huge backlog. Today I’m going to tackle two related questions at once. Do you have an opinion on the best place to save your money? Chime in below!
Where should I start saving?
First up, ashleyD commented on my recent post about using financial spreadsheets. She’s beginning to get control of her finances, but she doesn’t know where to put her money. She wrote:
I need help. I’ve been reading for a few months, but I haven’t caught on where to put my dollars. We’re currently using the snowball method to pay off our debt. We’ll be debt-free in June 2010, or maybe before. I feel an alarming need to put some money somewhere now. I’ve sold off clothing and I’m making a bit of money on the side with eBay. Where should I open two $100 accounts? We’re 25 and 29.
Congrats to Ashley for starting on this at a young age. It’s fantastic that she’s paying off debt, making extra money on the side, and looking to save. I didn’t take these steps until I was in my mid-thirties, and I wish I had started sooner.
I think it’s a good idea to begin an emergency fund as soon as possible. An emergency fund is like self-insurance: it’s a buffer against unexpected things that might come your way. But where to put the money? Based on my experience, there are two options that make sense.
Option one: Rewards checking
If Ashley knows she has self-discipline and can refrain from touching the money, she might consider a rewards checking account at her local credit union. From what I’ve found, these offer the best rates anywhere, though they do carry requirements in order to obtain the rate. (You have to use your debit card a certain number of time each month; you have to receive electronic statements; etc.)
Here’s a huge list of rewards checking accounts by state.
Option two: Online savings
On the other hand, if Ashley suspects her self-discipline might falter (as mine always did), she’s probably best served by opening a high-yield online savings account. I elected to use ING Direct, though there are many great options.
For me, the advantage of an online savings account is that the money is completely separate from my everyday checking. If I want to access the cash, I have to go through the process of transferring it from ING Direct to my credit union. The very act of doing so prevents me from spending the money recklessly. Another advantage is the ability to set up automatic monthly deposits, which helps me to save on “autopilot”.
What advice can you offer Ashley? If you were just starting to save, where would you put your money? How would you structure your savings? Would you set aside a certain amount every month, even if it was just $10? Or would you wait until you had large contributions to sweep into the account?
Should I chase interest rates?
Meanwhile, Bo has already started to save. He’s wondering if he should chase interest rates in order to make a little more money. He writes:
While I’m an ING Direct disciple like yourself, I’m awfully tempted to jump ship with the recent interest rate drop. ING is now at 2.2% APY, while HSBC Direct is at 2.45% APY and E-Trade is at 2.5% APY. Let’s say you have 50K parked — you’re talking an extra $125 or $150 a year. I know it’s not a lot, but if I was walking down the street and saw $150 laying on the sidewalk, I would definitely stop to pick it up. What say you?
This is a great question. In the past, I’ve come down against rate chasing, but that’s mostly because I think it’s a hassle — and because I didn’t have much saved. Now that I have more in savings, I’ve begun to see the appeal of picking up a little extra money for very little effort.
Still, I’m not sure it’s worth my time. My emergency fund has a balance of $10,394.04, which is earning 2.20%. If I were to move it do a different bank, I’d probably choose FNBO Direct, which is currently offering 2.60% APY — 0.40% over my ING savings. How much difference would that make in a year? $41.58, or $3.46 a month. I’ll be honest: even though FNBO is a heavy advertiser at Get Rich Slowly, I’m not willing to move my money out of ING Direct for $3.46 a month. FNBO gets good reviews, but they’re an unknown to me. I love the ING Direct interface and the multiple accounts.
But if I had $50,000 in the bank instead of $10,000? Would I move from ING Direct to FNBO Direct for $200 a year? As Bo says, I’d stop to pick up $200 from the sidewalk…
What about you? Would you switch banks over half a percent of interest? Over one percent? Would it make a difference if you had a larger or smaller balance? Are there any other tips you can offer Bo as he shops for online banks?
This article is about Ask the Readers, Basics, Choices
I’ve never been keen on chasing rates, as I’ve been with ING Direct for almost 5 years now. I find their system to be the easiest to navigate, and their customer service is spot on for new customers. Maybe someday I’ll have more money and be interested in chasing rates, but I don’t think there is much worth in it unless the difference in monthly interest is $10+
Your avdice on both counts is good though, so the readers are good to go with it.
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I’m pretty settled into my current account structure right now – I’ve got a Schwab checking account and three accounts with HSBC (Online Savings, Online Payment, and a CD). There would have to be a pretty significant interest rate difference for me to switch anything now – I like and trust HSBC and know how to work with them. I think “pretty significant” would have to be something in the range of 1%, and even then if it wasn’t a bank i was already doing business with I’d have to think about it carefully.
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I use INGDirect and have had good results with it. It is separate from checking and out of sight so I can’t readily access it for a non-emergency. I don’t think a 1/2 percent difference is enough to make a switch. Best advice is start now and do it consistently.
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We tried INGDirect, in large part due to the recommendations on this site. It just didn’t work out for us – the security requirements were so onerous that my wife (who has less tolerance for complexity than I do) never accessed the account and I rarely did. Worse yet, when we actually needed the emergency funds we were locked out of the account and had to go through ING’s password/pin reset process.
I don’t fault INGDirect for any of this; there are many people who would appreciate the beefed up security (they had the most layers of any online financial service I’ve used, and I’ve used quite a few). Just wanted to put that out there so that others can make an informed decision.
I’m curious what others think of PNC’s Virtual Wallet. It seems like an ideal account for folks getting started on fiscal responsibility; it includes a checking account, a traditional savings account, and a high-yield savings account. In addition, it has some tools that sound pretty handy: a calendar that highlights “danger” days based on your online bill pay schedule, a sort of “wish list” for tracking savings against various goals (i.e., car, computer, home remodeling, etc.).
Unfortunately I don’t have any first-hand experience with Virtual Wallet (yet) so I was wondering if anyone else had input.
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I have an HSBC Online Savings account, and I just went through this question myself. I set up an Excel sheet to tell myself how much extra cash a higher interest rate + compounding would create after a year. The higher the amount of extra cash, the more likely you are to consider other options. I ended up opening another online savings account at GMAC, so basically I stopped to pick up that $150 on the street.
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I don’t know that I would chase .5% but I am getting ready to switch one of my online accounts to ING, for two reasons 1.) the $25 bonus, and 2.) I want to utilize the subaccount feature. Also the account I am moving the funds out of has dropped below 2%.
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I have a checking and savings account at my local credit union. I keep only about $700 in the local savings, just as a safety net. The rest of my savings is divided between an online account at Capital One and Christmas fund at ING. I’m getting ready to close out the Capital One account and put the money that was there with ING. I’ve been VERY happy with ING’s customer service and I love their online set-up; it’s incredibly easy to use. For me, it’s worked best to have the bulk of my savings in an online account, both for the higher interest rate and for the extra steps needed to access the money. It’s made it easy not to touch the funds.
There would have to be a significant amount of money on the table (or the ground) for me to “rate chase,” but I don’t have a considerable amount in the accounts right now. Service, reliability, and ease of use are more important to me than an extra $40/year.
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Let me give a second opinion on FNBO, then, if all you’ve heard is “good reviews.” They are garbage and their service is horrible. I had my money there for a few months right when they started offering FNBO Direct accounts, and I will NEVER go back after how they treated me.
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One other point — I’m for putting the money in an online savings count without a debit card available (this may be most online savings accounts). It usually takes two to three days to transfer the money to my checking account and that delay can prevent unwanted/ frivolous spending.
As for rate chasing — I just check in every 6 months or so and make sure I’m not missing 0.5% — less than that, not really worth it to me.
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I had an account at UFB Direct last year, and boy did that suck. I started it because there was no way to get interest on my money at my bank in town, then found that the credit union had incredible interest rates on their rewards checking (and they still do). Problem was that the debit card never worked, not once, and that every request had to be faxed to them. I eventually managed to empty the account of all but the minimum, and asked that it be closed six months after it opened– that hasn’t happened either, but I’m not willing to go through the hassle for four dollars.
I need the interest to make saving worth it. It’s a psychological boost. For a while, I kept my main money in the interest checking account, and switched tuition money over into the no-interest savings account every month so it wasn’t really there. Then, when it was clear that my budget was working, I just kept everything gaining interest.
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While I wouldn’t advocate chasing rates on a frequent basis, I definitely wouldn’t stick with ING’s ~2% return just because you’ve been a long-term customer. And while we’re on the subject, I have to say that I really don’t understand the fascination with ING Direct. I know they were one of the original online savings accounts, and they obviously market themselves well, but they’re consistently an entire point (or more!) behind the top rates. SmartyPig, for instance, is now at 3.25%.
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Re: the weakonomist Says: “I’ve never been keen on chasing rates, as I’ve been with ING Direct for almost 5 years now. I find their system to be the easiest to navigate, and their customer service is spot on for new customers.”
In strong agreement. Jumping from bank to bank is just a hassle after awhile, and besides, you lose any minor loyalty interest bumps they may offer you automatically. Take that buck or two diff a month you “may be losing” and buy a coffee at a nice little grille and enjoy the day, knowing your money is still growing with a solid firm.
That said, if I had $150K hanging around, then I’d work the best deal every 6 months or so…but that’s “if”.
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I have two high-interest bank accounts with different banks (well, one’s a credit union
I divert my savings into whichever has the higher interest rate during the year (I check the rates every month) and when I need to withdraw money to pay for a savings goal or a large bill, I take it from the account with the lower interest rate.
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Re ING Subaccounts
Currently I have 2 high interest accounts at my bank. There are no subaccounts at the bank, only in my spreadsheet. So my account would have, for example, $1,000. In my spreadsheet, the tabs for each account would be “Car Repair = $250, House Repair = $250, Electric Bill = $250, House Taxes = $250″.
Currently, if I needed to withdraw $500 for a house repair item, I just put -$500 in the House Repair tab, and my new balance is $500 total and just transfer the $500 from my high interest account to my chequings to pay for the repair. Transfering money to different accounts is as easy as making a withdraw on one Excel sheet tab and making a deposit on the other tab. No need to login to a bank.
My question to you is: How does this work with ING Subaccounts?
-Can you just withdraw $500 and ING will take it out of subaccount A & B? Or do you have to transfer $250 from account A and then again for account B?
I like the idea of subaccounts at the bank, but I think on one hand it’s easier to just fudge the numbers in my spreadsheet rather than logging into the bank to make 2 withdraws.
However, without discipline, I know it can be easy to edit the spreadsheet and take out the money.
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@Andrew (#8)
I’d love to hear the specifics about your experience, and I suspect others would as well.
And I think this highlights why rate-chasing isn’t always the best thing. One reason I stick with ING Direct is that I know that I like their interface and service. I’m happy with them. This is worth a lot to me. I spent 15 years at a bank I hated because I didn’t know any better. My opinion is that it’s okay to sacrifice a little in the rate department in order to have a customer experience that leaves you happy.
Also, I think Kyle’s unhappiness with ING highlights another important thing about choosing a bank. As always, you need to do what works for you. Just because I like ING doesn’t mean you will. That bank I hated for 15 years? Kris likes them fine, and still has her accounts there. My recommendation is to find the highest interest rate you can in a bank that makes you happy.
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Definitely put aside a little bit of money every month. Don’t wait until you have a large “pot” to open an account with. Putting a few bucks in a coffee can until you have a large amount to open an account with is the same thing, except without the interest. Most online banks have like $1 minimums to open accounts.
For myself, I have a couple accounts with USAA that I don’t really keep any money in. I’m a member because they have awesome rates on auto insurance. And you can deposit checks just by scanning them with an online interface, you don’t have to mail them in, which is great since my job doesn’t do direct deposit. So I get my monthly paycheck, send enough of it to my USAA checking account to write a check for my rent and car payment, pay off the balance on my USAA credit card online, and then transfer the rest to my accounts at HSBC Direct, where I keep my money.
Unless you have a sizable chunk of money, rate chasing doesn’t really make sense, unless there’s a huge difference in rates. Definitely leave your brick and mortar bank to chase the rates at online savings banks. But between online banks, the differences are usually only a few fractions of a percent. The delay from when your money is in transfer limbo and when it actually starts getting that better rate takes a decent chunk out of what you might be gaining, and it’s a pain in the butt besides. If you’re just starting out, pick a good online account with a nice rate and stick with it until you have a lot of money. The only exception I’ve taken is when eTrade recently offered a $25 bonus for opening an online savings account. That’s a couple month’s worth of interest at my current account balance at HSBC, so I opened with the minimum ($1) and I’m going to keep it there for the minimum amount of time before I send it back to HSBC.
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I have my emergency fund savings in my local credit union. I know that I could get slightly higher rates online, but I get value-added by knowing that my savings are enabling the credit union to give reasonable loans and mortgages to my community members.
Chasing interest rate shifts is too much churn, change, and time invested for the return. I want to spend time on things with more central importance in my life.
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Banks will always have “teaser” rates to get new money, then the rates will fall in line with the norm. I don’t think it’s worth chasing. Has anyone called their bank and said “Bank A is offering x%, can you match that?”… Maybe a phone call will help bump your rate..
As far as savings:
For my emergency fund, I’m laddering out CDs every month for a year. As a CD matures I just roll it over into another 1 year CD. I’d like to eventually get to a year’s worth of expenses laddered in emergency fund CDs. That would be a huge piece of mind.
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I did some rate-chasing last year and now have accounts with HSBC Direct, Emigrant Direct, and GMAC Bank. I have moved most of the money to GMAC (some in savings, some in CDs) since they now have the best rates. I kept the other accounts open so I can move back to them if they once again offer a better rate. The only problem I see with rate-chasing is that I lose several days of interest transferring the money from one savings account to another via my checking account (at a credit union).
Speaking of GMAC Bank, I have been happy with their website and their service. However, I don’t understand how they can be offering the best rates, since they don’t seem to take the money-saving measures that the other online banks do. Not only do they mail out monthly paper statements, but they also send a big “welcome” package (that includes a thick book) every time I open another CD. I was also surprised that there was no way to close a CD and have the money moved into my savings account using their website – I had to call them up. Not that that is a problem, I just don’t see how they can be making a profit.
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Well… it is not JUST about interest rates. Since opening my account at ING, I’ve been blown away by their transparency and the way they treat me as a customer. It’s honestly just a much better experience than banking with any of my previous banks. This makes me somewhat loyal, so I’m not going to move my money elsewhere unless they really screw something up. As far as I’m concerned, their interest rate is still competitive, even if it isn’t the best available right now.
Now, if the opposite was true, and I didn’t much like doing business with them — the interest rate might provide an excuse to switch. But there are other factors involved. (And, of course, I only have around $7k saved right now. Though, if you have enough in your bank account that .2% actually makes a difference to you, shouldn’t that money be invested somewhere?)
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Regarding where to put your savings…I recommend building your emergency savings with a high yield online savings like ING or FNBO (personally I use ING!)
My savings builds at ING because it is “virtually untouchable”. I set up small direct deposits for every pay period and I do not have a debit card or any way to immediately access the funds.
Because of this — it is easier to save. HOWEVER, in case of a true emergency — 3 business days to access my funds may not be enough….so for this reason I keep about $200 in a Bank of America savings account. It should be able to cover most unexpected emergencies should my checking run out (I only keep enough in my checking to cover expenses with a little buffer)
Regarding chasing the rates — it just doesn’t seem worth it to me. I can understand why people do it though. To each their own!
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Use the KISS Method (Keep it simple stupid), unless you have a large amount of money in your emergency fund the interest realistically does not matter. What matters is that your emergency fund can be easily accessed in an emergency. I recommend either a checking account or a money market account that you have check writing privileges with. The online savings accounts are great for a little more interest but I am not going to wait 3-5 days for the bank to process an ACH to put the money into my checking account. If I have an emergency I need the money right then and I not paying the wire fee to have access to my money! Remember that your emergency fund savings is like an insurance policy that you never know when you are going to need it. Keep it accessible!
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Here are some specifics. A few weeks after I opened an account with FNBO, they sent me an email that they needed me to send them my previous employment history in order for them to “comply with the Patriot Act.” Note that this was WEEKS after I had already opened an account and funded it, at which time there was no mention of them needing this information.
The “need this info to comply with the Patriot Act” claim was obviously stupid because no other bank at which I had an account needed it, and it’s not like the Patriot Act applies differently to different banks. But I didn’t want to argue about it so I just told them the info they wanted. I even received a confirmation email that they got it. Lo and behold, the VERY NEXT DAY I got an email from them saying that since I hadn’t sent them the information they requested (which I had, and even if I hadn’t it was only a week after the initial request) they were placing a hold on my account and I wouldn’t be allowed to make any deposits OR WITHDRAWALS until I did what they wanted. Needless to say, it was a huge hassle to get the hold removed and I immediately removed all my money when it was, as I don’t take kindly to banks holding my money hostage. Especially not when it’s due to some obviously false claim about what they are “required” to do under the Patriot Act.
Hope this helps you all make your decision about whether you’d care to trust your money to FNBO. Luckily I could afford to be without the money I kept there until I got them to remove the hold, but I can’t imagine what would have happened if I’d truly needed it and they refused to give it to me.
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I can also second John’s comment about GMAC — I have received nothing but excellent and prompt service from them, and their rates are great. I don’t know how they do it.
The checking features on the money market account they offer are also very handy.
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Picking up $200 off the street is a bad analogy to chasing rates. The rate and amount in a savings account aren’t fixed so it’s not certain that you’ll make even that much.
And even if it were is it really the best way? If you want to make an extra $200, why not spend ONE DAY babysitting or tutoring. Or you could hold a yard sale, or a craft sale. Or any of a hundred simple little money makers. Or cut $4 off your grocery bill every week by not buying that can of cheese dip or a 6-pack.
Essentially, with interest rates this low it is absurd to go around chasing them. Limiting your spending and increasing your income is better for your balance sheet and improves your life style. But, I’m sure to be preaching to the choir here…
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I have been using Southern Missouri Bank & Trust (www.smbtonline.com). They offer a Rewards Checking @ 6.01%. Only catch is you have to do 12 debit card transactions a month and a couple direct deposits or automatic ach payments. Their bill pay is great. I have most of my payees set to deliver the bill directly to the bill pay page, so I know when it is due and how much (chase credit cards, ATT internet and wireless, most utilities, etc). One drawback I see is their lack of an easy way to transfer $$ to/from another bank. So I have kept my local bank to deposit checks into and I can transfer from there to SMBT and then I pay all of my bills from SMBT rarely ever writing a check. They also refund ATM fees for when you need to pull out cash.
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Call us old fashioned, but we keep our savings in the neighborhood bank. We can walk or ride a bike there, the tellers know our names, and hopefully our money stays in the community. The interest rate is not great, so we keep only a small amount in savings and the rest in a CD ladder. Our savings contains about 3 months bare bone living expenses and every 3-4 months a CD comes up for renewal that would provide us with emergency money if we needed it. Fortunately, we’ve just been able to renew and haven’t had to dip into the CDs.
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If you’re frugal, you may not want to chase that extra 1/2% or 1%. Here’s why.
What is the value of your time? If you value your time at $40/ hour and you spend 2 hours looking for the best interest rate and then, once you find it, you spend another 2 hours moving your money, you just spent $160.
If the added interest is greater than $160 – do it. Otherwise, forget it.
Project your extra income that you’d get by opening the new account and guess how much time it would take you to earn it. If your account is big enough, go for it. If not, sit back and enjoy the day.
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I agree with Ryan. I don’t want to wait to access any of our funds — whether it’s for an emergency or not. Perhaps it’s just my age (see name for a clue), but I still like brick and mortar banks. Ours is the largest bank in our state and has branches around the city and the state. We have our checking, savings, home equity LOC (not used in about 15 years), and overdraft LOC all at the same bank. We don’t have any monthly fees and because we’re over 50 and have direct deposit, the bank also reimburses any ATM fees charged by other banks (average about $6-9/month). I like being able to deposit checks, make withdrawals, and do transfers between accounts at an ATM. When we bought a plasma TV in November, I wrote out a check at the store, and then we drove to a bank branch where I used the ATM to transfer the funds from our savings into our checking account. Easy! That’s the way I like to bank.
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@ Ryan Loos (# 22)
I understand what you’re saying about keeping your emergency fund accessible, but for people who are keeping 6 months or more of expenses in their EF, the interest rate really does matter (unless you have extremely low monthly expenses). Ideally you would have both check writing privileges and a strong interest rate, but if I have a $20k+ emergency fund it’s more important to me to have a strong interest rate than instant access. Why? Because unless you end up in the highly unusual situation of needing a huge amount of cash on only 1 or 2 days notice AND CAN’T USE A CREDIT CARD, the delay to get your money out of the online savings account won’t matter. If you’ve been handling credit responsibly in recent years and have $10k or more available on your credit cards I would have zero hesitation to use that in a crisis, knowing I could pay the entire amount off easily with the emergency fund money that’s available only a few days later.
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I opened a GMAC account a few months ago. Although I like their rates, I am switching to ING. Since I’ve opened up the ING account I’ve noticed it’s so much easier to use. Plus, I really like the sub accounts feature. Bottom line is I don’t have enough money for the difference in rates to really matter. It’s all about convenience and how easy the website is to use.
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My husband and I have two online savings, ING and HSBC. ING certainly is easier and we’ve had these accounts for a long time. We have 75k in one account now because we were going to move pre-economy tanking and needed ready cash. Now that that decision has been made for us, it’s time to rethink. Moving would get us an additional $350??? So, a higher rate may be worthwhile especially since there is no need to open one, just use existing.
Also, I used the automatic feature once at ING; however, I really like savings manually. There is a great deal of satisfaction in making the deposit I would so worked to earn. Probably age related
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When considering rate chasing, you also have to factor in the week in which you don’t earn any interest. So while the .5% over 51 weeks is a plus, you have to weigh it against getting no interest for about 1 week while the funds are being transferred. Figure out how long it will take to make up that week of lost earnings. Sometimes this makes the whole move more of a hassle than it’s worth.
That said, ING has relatively low rates for online banks. I’ve had accounts with HSBC and iGObanking — both of whom consistently have higher rates than ING. I find HSBC’s security to be as rigorous as ING’s. Since their rates are consistently higher, the rate chasing may be justified, as their rates will likely continue to exceed ING’s rates whenever interest rates start to rise again.
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Try being Canadian right about now.
The Tax-Free Savings Account (TFSA) is confusing a whole lot of us. It isn’t just a traditional savings account — it can be any number of approved savings or investment vehicles.
When trying to figure out what to do with my account, I learned that rate isn’t the whole story. You’ve got to watch that monthly or annual fees don’t eat into your interest. My TFSA probably isn’t getting the best rate out there, but the small difference is offset by no fees, good customer service and convenience. (it’s where I’m parking some of my long-term savings because we don’t pay tax on the interest, though we can only put in $5000 a year).
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I didn’t notice anyone addressing ashleyD’s first question: Should she start saving while “snowballing” her debt?
I think a “mini” emergency fund would be essential to have, even if it means going back to only minimum payments on your debts for a month or two. Otherwise, how do you avoid new debt when the inevitable emergency comes along? $1000 is a good number.
Remember, if you do have an emergency, stop the snowball again until the emergency fund is replenished.
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I’ve had an account at FNBO for about a year now and have had absolutely no problems there. They NEVER requested any employment info or patriot act stuff – what’s with that? The one time I needed to phone them they answered promptly and helped me out with a fabulous attitude. I also have an account at GMAC and have had similar good experiences with them.
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Instead of switching to another online bank, if you have $50,000 to bank, the thing to do would be to switch it to one of those high-yield checking accounts you mentioned. An extra 3% interest (2% ING Direct to a 5% checking account) is $300 more per year if you have $10,000 in the bank, $1500 more if you have $50,000 in the bank. $1500 more per year for opening a new account is pretty good money for not very much effort.
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When I rate chased and shifted from ING to Capital One the rate there was 5.75%, now down to 2.61% still better than ING and only worth it if you have a lot in savings. I truncated my banking accounts and now only use my credit unions, USAA (normal checking and savings buffer as they are #1 in customer svs.) and Capital One.
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I hope my questions gets answered
I am 32 my wife is 31 and we have a 2 year old. We have over $10,000 in savings (Emergency fund) and fund our Roth IRA. We have zero debt other than about $38,000 left on our house (we triple our payments and have done so for about 2 years.)
We may be moving this summer and when we sell the house we may live with my folks for 6 months to a year. I will likely have $100,000 cash on my hands. Is there a better place to store that cash other than a plain-jane savings account or are there more attractive options?
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@deb: I opened my account around the time they started offering FNBO Direct. Maybe their policies have changed since, but I’m not going back to find out. I’m glad you haven’t had any bad experiences with them so far.
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I do chase rates, at least when they are more than about 0.5% apart. I’m currently at dollarsavingsdirect.com earning 3.05%, although I still have my empty accounts open at ING and EmigrantDirect.
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I hate chasing rates unless they’re a full percentage point higher, and not a quarter.
Other than that, I don’t bother, and I have $36k saved in the bank. It’s not worth the constant switching.
PC Financial in Canada gives you anniversary bonuses the longer you keep your money in there instead of rate chasing, so I stick with them.
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Ashley might want to consider laddering a few no-penalty CDs as extra money comes in. The rates are pretty terrible, but they’re perfect for dipping your toes into the water and getting used to having your money locked into investments.
Again, it’s mostly a psychological thing–building confidence and exploring new money management vehicles. It’s not a long-term solution.
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As a Canadian, I have to applaud the introduction of the TFSA. Invest it in just about anything, savings account, cd’s, mutuals, stock, or even etf’s…….and don’t pay any tax on interest and profits. Seeing as I’m over 55, I never pay any fees for any normal banking activity.
But I have to wonder after reading all these comments why no one has raised the possibility that the bank they have chosen could possibly fail. Everyone wonders why GMAC can offer such good rates and spend money on fancy add ons to customer service. I’d worry that those practices could help de-stabilize the company; preservation of capital is everything.
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I have a substantial emergency account (over 40K) but I just don’t have the time or discipline to chase rates — there are more fruitful uses of my time. If I did have more time (such as a job loss, knock on wood), I’d do it actively.
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Just started reading GRS. Found it from The Simple Dollar (started reading that last month). Great site! I love these blogs!
I have an HSBC Direct High Yield Savings account and a Capital One Direct Banking High Yield Money Market account (emergency fund, has checks and a debit card for quicker access). Anyway, the limited research I’ve done when looking for these accounts has shown me that the rates move a lot. They move around a lot because of our current economy no doubt. Right now I really don’t think it makes sense for any amount of money to chase rates…it’s just too unstable. The competition usually just lowers their rate within a week or two anyway with all this fluctuation.
As for saving, save whatever you can. It’s important for habit building. If it’s $10 a month, that’s $120 a year…and you get used to the idea of putting the money back. I’ve never really stuck to savings for long as I’m only 25 and getting it all together finally. I’ve just started in January and I’m loving watching that balance grow!
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Moving our savings over to ING last year was one of the smartest financial decisions I ever made. While we never had an issue with debt, we weren’t saving much either. When we opened an account at ING, I set up separate subaccounts for our home escrow, life insurance, auto insurance, and savings toward a car and vacation. Every time payday rolls around, the money is deposited in our local credit union and automatically whisked away again to its proper account at ING. While I’m sure that people more disciplined than I could accomplish this on their own, it’s been a wonderful feeling to open the property tax or insurance bill and know that the money is ready and waiting to be transferred.
Even though I know other banks offer better rates, I can’t imagine another system working any better, so for now I’m staying put at ING.
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I recently opened a High Yeild Online Savings account for the first time. I read the recent article here, and then used http://www.bankrate.com to find the highest interest rate around. I found that http://www.DollarSavingsDirect.com had the highest rate for 2 weeks in a row (3.20%). I am wondering why so many people are using ING Direct when DSD has a substantially higher rate. Is it that I’m just getting into this, and that ING had a higher rate a while ago?
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@Nick (#48)
There are a couple of reasons I don’t use Dollar Savings Direct. First, they’re new and unproven. Yes, their rates have been high, but they’ve been dropping even faster than most other rates lately, it seems. This is a concern for me. Second, they don’t rate very highly on the Bankrate “Safe & Sound” index. I think they might only have one star, in fact. They’re FDIC insured, so maybe that’s not an issue, but still… Finally, as many have noted, ING has some convenient features and a nice interface…
I hope to check out Dollar Savings Direct with a little bit of cash in the near future, though.
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Regarding saving, start now. $10, $25 a week whatever you can afford and you can afford more than you think. The sooner you start the happier and further ahead you will be. Don’t wait for a large chunck of change as you’ll be waiting forever. How much is enough to start after all?
I’m generally against rate chasing as I view at as a waste of my time. I’d rather be productive with other efforts. I’m not sure how taxation works in the US but in Canada based on my marginal rate I actually need to get 5% from my account to come out ahead when I consider both taxation and inflation. So while I want a good rate I realize I’m loosing money anyway. Therefore, I spend my time on other activities, not on rate chasing.
My savings account is a rainy day fund, it needs to be there for when the roof collapses. It’s not there to generate significant income.
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