Hello, I'm new here, so forgive the probably basic questions.

I noticed in the comments to an old article that a lot of folks here recommend investing in a high yield online savings account. What are your preferences when it comes to this? I think I remember most people saying they went with ING or HSBC. Any others? I've looked into HSBC a bit, and I notice that their highest rate, 5.1%, is only available if you choose the 6-month option, and only for "new money." Presumably this means the real rate I would be looking at is 2.55%, right?

I am a college student without much time or money to spend, but I want to get my feet wet a little, as I've gotten a reasonably well-paid summer job and I finally have a thousand dollars or so to throw around. Let me know what you think.

Personally I like ING. I've been with them for years and, while they no longer have the best rate, the excellent customer service, great interface and ease of use help make up for it. My favorite part of their accounts is that you can have sub-savings accounts that you name so you can easily save for multiple goals in one place. It makes my lazy accounting very easy to manage.

I've not worked with HSBC but I've heard it's a nightmare and I know several people who have closed their account due to customer service issues. You should check out www.bankrate.com to find out what some of the other high-yield accounts are.

As far as having a few thousand to throw around, unless you know that you're going to be needing that money, I'd seriously consider opening a Roth IRA with at least part of it. Opening a Roth now and continuing to add to it as you can will do amazing things for your retirement. You can open an account with Vanguard for as little as $1k in the Star funds. There are also options at Fidelity and T. Rowe Price that would be good to look at. JD did a recent post on this that you can check out on the blog.

Good luck!

The IRA is interesting, but from the looks of it it's funded on monthly contributions. I won't have this job once summer is over, and will be back to earning just enough to pay the bills and some personal expenses so that I can focus on school (the switch is from paralegal to religious school teacher if that gives you a frame of reference). I don't know when I'll have a job that pays this much again, and I don't imagine I'd be able to make regular contributions to an IRA for a few years at least. I am only 21 so that isn't panicking me, but am I even allowed to just sit on an IRA without contributing?

Yes, you don't have to contribute if you can't. Of course, it's best if you can, but if that's not an option, getting money in there and just letting it sit and grow will do wonderful things for your financial future.

All right, so potentially I can allocate $1000 in that direction. I probably have another $1000 to allocate as well while still keeping enough cash on hand for the near future. I guess I could also put it toward an IRA, but I am also looking into CDs and high yield savings at ING, as you suggested. Just to clarify, looking at a page like this: http://home.ingdirect.com/products/prod ... tricOrange, when I see "interest rate" and "apy" side by side, I'm not to expect that I'll be accruing a monthly interest plus a kind of year end bonus interest, right? My understanding is that those two numbers are just two ways of saying the same thing, i.e. for my limited finances I could get 4% total by the end of a year. In that case a CD seems wiser at 5.35%, right?

That's correct. APY is the amount you'll have gotten over the year if you reinvest all of the interest payments. That happens automatically with a CD.

If you're going to do CDs and use them as an emergency type savings account, I'd ladder them so you have one maturing every month or so. That way you have a steady stream of money maturing that you can access if you need and if not, you can let it roll over. Here's a good article on how to set that up: http://www.bankrate.com/brm/news/sav/20010521b.asp

If you can manage it, I'd do at least the $1k into the Roth. Then if you find later that you have additional money you can deposit it then. You just want to remember that the Roth money is supposed to just sit there and grow so you don't want to put it in there if you're going to have to take it back out.

laddering is intriguing, but how do I do it effectively with only 1k? Any breakdown suggestions for amounts/times?

Well, the easiest way would probably be to do something like this:

Buy 1 each of a 6, 9, 12 month CD at $250 each.
Then buy 1 - 1-month CD at $250 and renew it for 1 month for the first 2 months and then set it for a 12 month. When the others come due renew them for 12 months.

That will get you a CD maturing every 3 months.

You can also set it up so you have one every month but it will be more complicated...

Assuming that I purchase the 1-month cd from someone other than ING? I don't see that they offer such a thing.

WaMu Online Savings would be another option. 5% APY when you apply online, but you also have to open a checking account with them to get the "relationship rate". Both of them seem to have no recurring fees.

I use Capital One online. Not the highest yield available, however it is 4.75%. My experience signing up was not the easiest, more laborious than difficult. Overall I have been happy with it though. It is easy to transfer money into a checking account and also you have limited check writing abilities (3-4 per month) which I find useful for paying for big things like car maintenance, my wedding, vacations, etc... Good luck, and just remember, getting started is half the battle, better to earn 4% on an ING account, than the nominal amount you'll get in a checking account. Funding a Roth sounds like a great idea, and I am going to do so shortly myself!

Pf101, do you work for ING? Just kidding.

I use both HSBC and ING. I don't know what kind of customer services is needed for these accounts--the whole idea is that they are mainly self managed. Anyway, no troubles at all with HSBC, but I have never needed customer service. HSBC has a better rate, and they also give you a debit card for emergency. For that reason (the rate, mainly) I keep most of my money there.

I started with ING though, and keep it around. It does have a better online interface and the subaccounts are handy, but it seems like your case just requires one account.

I agree with what has been said on the Roth. Even just having a little money sit there is nice, as you are young, don't worry TOO much about making monthly contributions. If you want, you could also throw any other money you come accross in there later (gifts, etc)

One more thing. If we are talking about 1000 or so, laddering probably isn't going to make THAT much difference. Calculate how much interest you'll earn during a six month period with a cd vs with it just sitting in your savings. You might find a difference of a couple dollars. Every time I've looked into laddering for myself (tbill and CDs, I couldn't bring myself to go through the hassle and having it "locked" away, as I still don't have that much money to dedicate to it.

That said, it still might be something slightly more "fun"/interesting to do with your money than just a savings account, and good practice for when you have even more money on hand.

i use Igobanking at 5.3% APY for their savings account. finally closed my ING account after maintaining $5 for the past 6 months. don't really understand people's affinity towards ING when you can get .8% APY more, but that's just me.

the purpose of laddering is to have funds available at periods of time plus to be able to adjust if you feel interest rates will increase. if you need the flexibility of having money accessible, then i'd stick with a high yield savings or money market account. if you can get a higher rate and do not need the funds readily, then you could lock into CD's. It is a matter of preference. remember, the difference adds up over time.

Yeah, I could never be bothered. I keep my emergency money in a regular ING savings account and only opened a GIC when I had an extra $10,000 that will eventually go toward a downpayment on a house, but not for at least another year.

But as far as laddering my emergency fund, the benefit just doesn't seem worth the hassle.