Prime Time Money

I’m doing a series of post that will inform you of the 10 things that we’ve done that I believe has brought success with our personal finances. Most are simple things that anyone could quickly implement.

Put Your Savings in a High-Interest Savings Account

For this post, we’ll look at the advantages of opening a high-interest savings account. Do you have savings in a bank? Most of us do since most banks will automatically attach a savings account to your checking account. If you have been wise enough to set money aside in that savings account (for emergencies, future purchases, etc…) then you are most likely earning around 1% interest (at the most) on that money. Congratulations, your money isn’t even keeping up with inflation.

You should move that savings to a savings account that earns more interest. In the past couple of years, several online-only banks have opened up which are paying 4% or more in interest. That’s $400 for every 10k, per year. Nice! Most of these banks are easy to setup, insured, and carry no fees.

I Recommend ING DIRECT Savings

My wife and I started using an online high-interest savings account shortly after we got married last year. We chose ING DIRECT and set up automatic transfers from our regular checking account in order to save for an emergency fund (3 months’ expenses) and a down payment on a home purchase. We’ve loved watching our balances grow and the huge monthly interest payments. Here are some things to keep in mind if you are going to move to a high-interest bank account:

Multiple Banking Options

There are many online banks to choose from. We chose ING Direct because of a friend’s recommendation, but there are many to choose from, each with different advantages. Flexo at Consumerism Commentary keeps a listing of the online banks to compare. Some of these are paying more than 5.25%.

Get Free Money

Get free money just for opening the account. With ING Direct, you can get a free $25 when opening an account. Visit this page and I will show you how to get the $25 (I will also get $10). Thanks in advance.

Transferring Money Takes Time

Transfers can take a while. We recently needed to transfer some of our savings back into our checking account to cover a big payment. We requested the transfer on May 5th, a Saturday, and the money was in our checking account on May 8th, a Tuesday. The official statement from ING Direct says:

“ING DIRECT is unable to guarantee the date a transfer to or from your linked account will be complete. However, depending on the date and time of day of your request, it should be completed in two to three business days.”

This is really the only drawback to using this type of account. But if the funds are for emergency (job loss, medical bill, car repair, etc..) or known future purchases, then you’ll most likely have plenty of time to move the funds.

Open Multiple Accounts

You can usually open more that one account. This comes in handy when trying to save for different items. We have separate accounts for emergency savings and our down payment. Keep in mind though, there are limits to the number of transfers between accounts every month.

Photo: by ishrona