How to Find the Best Place To Put Your Savings.

The Federal Reserve has recently announced that it will be keeping interest rates that banks pay to borrow money at 0 – 0.25% for the foreseeable future. This is done in the hopes of encouraging borrowers and spenders, but punishes savers. This makes it harder than ever to find the best place to let your emergency fund grow. But just because it’s difficult to find a place to make your money work harder for you doesn’t mean you should let it sit idle in a low yield bank account!

While it’s easy to find places to stash your cash that pay more than the average bank savings account (currently 0.08%!), high yield isn’t the most important thing when looking for a home for your emergency fund.

The two most important factors to determining where to keep your emergency cash are:

1. Safety
2. Liquidity

“Safety” is a measure of short term risk. Putting your emergency fund in the stock market is foolish because stocks can lose money on any given day, and you need to be able to count on your money being there when you need it.

Certificates of deposit are safe. They are FDIC insured, so you cannot lose principal. But this is where liquidity comes into play. CD’s are safe, but you don’t want your emergency fund tied up in a 5-year CD when you need that money now.

Because of these two factors, the most common places to store your emergency fund money is in a high yield savings account and sometimes a short term certificate of deposit (CD). You could put some of your savings in a savings account, and the bulk of it in a CD. This way you have immediate access to what’s in the savings account, but the bulk of your fund would be in a CD earning higher interest.

Ideally, you’d put the money you would need for repair bills on the house or car in the savings account, and you’d use the CD for that part of your savings you would tap only in the event of a loss of income or some larger emergency.

In the current economic environment however, it makes sense to use only the high yield savings account and skip CDs. Here’s why…

High yield savings account vs. a 1 year CD.

A quick look at yields on 1 year CDs shows that the highest yielding CD (currently offered by Sallie Mae) only offers a tenth of a percent more that the highest yielding savings account, but you wouldn’t have access to your money for an entire year (without penalties). That’s simply not worth tying up your money like that.

So, on to high yield savings accounts…

How to Find The Best High Yield Savings Accounts.

First, head over to BankRate.com and check out their list of high yield savings accounts. Sort by APY (the yield you can expect if you leave your money in the account for a full 365 days), and work down the list. Be sure to read the details of the terms and look for a star rating of 4 or 5.

That star rating is Bankrate’s rating system which rates a financial institutions solvency and safety, not customer service or satisfaction. It’s meant to give an indication of the likelihood of the bank being closed by the FDIC.

For the record, neither of my banks is on the list (ING direct or HSBC)*, so it’s not the only resource you can use but it is a good place to start. If there’s a bank or credit union you’re interested in, you can search Bankrate’s safety ratings.

They also offer a checking account search.

* I’ve been a happy customer of both HSBC and ING Direct for over five years now. I’ve kept the bulk of my savings at HSBC direct, but they have recently decreased their rate. It’s still much higher than the average though. ING direct has been very good to me, and they still sport one of the highest rates and easiest to use website in online banking. They’ve recently been acquired by Capital One though, and a lot of people are not happy about that. I haven’t seen any changes yet though, so I’m taking a wait-and-see approach. Plus there’s the ever popular $25 ING Referral codes that give you an extra $25 free when you open an account with $250 . (that’s an immediate 10% return on your money, for those of you playing along at home)

Look for special deals.

It’s also a good idea to check out online forums, like the FatWallet finance forum and see what people are saying about various banks and account offerings. You can also search for discussions on high yield savings accounts and learn about the most recent perks for signing up with various banks. Sometimes they offer introductory rates that are higher than normal, or cash back when you open an account. Public forums like FatWallet’s are a great source for getting the experience of real customers, instead of marketing execs.

Please share any tips, tricks or experience you may have in the comment section below.

Happy Saving!

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Best High Yield Savings Account Rates Of 2011.

Just as there are buyer’s markets and sellers markets in real estate, so there are saver’s markets and spender’s markets in banking. It’s by design, although the Federal Reserve may prefer to look at low interest rates as spurring investment rather than spending, but the truth of the matter is that low interest rates typical spur more debt than more investing.

Alas, such is the state of savings rates today – pitiful!

But just because rates are low, doesn’t mean there aren’t better choices than the 0.01% local banks seem to give. Here’s a list of the highest yielding savings accounts as of August, 2011 (in order of rate, highest to lowest):

• Everbank offers high-yield money market account with an APY of 1.01%. The minimum deposit is $1,500 and there’s an $8.95 per month fee whenever your balance is less than $5,000 and a $10 transaction fee for every transaction over the monthly limit. (click the link above for details)
• Incredible Bank offers a checking account with 1.21% APY with a $1,000 minimum deposit to open. There’s a list of additional fees though.
• SFGI Direct offers a 1.11% APY savings account with a $500 minimum to open.
• Discover Bank has a 1.15% APY online savings account with a $500 minimum to open. click here for fees
• CNB Bank Direct offers 1.15% APY on its high-yield savings account with a $1 minimum balance. No mention of fees
• Sallie Mae Bank has a 1.10% APY high-yield savings account with an additional 10% rewards match on Upromise accounts.
• SmartyPig is offering 1.10% APY on its savings account.
• Capital One has an online savings account that pays 1.10% APY on balances over $1000. If you have a Capital One credit card, you can earn a 10% bonus on your interest earned.
• Nationwide Bank is paying 0.50% APY with a $300 minimum balance. (click the link above for fees)
• OneWest Bank has a Green Savings account that currently pays 1.00% APY, with no minimum.
• iGOBanking is providing a 1.01% APY with no fees and no minimums.
• One of my favorites, ING Direct is paying 1.00% APY with no minimums on its Orange Savings account Note: If you’re interested in ING, you can get an extra $25 when you open with one of these referral codes (email me if they have expired, and I’ll send you a fresh one)
• American Express offers a 1.00% APY high-yield savings account with no fees and no minimums.
• Dollar Savings Direct has an APY of 0.90% with no fees and a $1000 minimum balance.
• FNBO Direct has an 0.85% APY online savings account with a $1 minimum deposit.
• The HSBC online savings account currently provides an 0.80% APY. There are no fees and no minimums, but you need at least $1 to open the account. HSBC is my other high yield savings account (ING is the 1st), and I’ve had no complaints.
• Emigrant Direct also offers 0.80% APY with no fees and no minimums.

You’ll likely notice a trend as you go down the list – as the yield drops, so do the fees and additional requirements. Also, many have implemented new fees and requirements due to the Frank-Dodd financial regulation passed by Congress after the recent financial meltdown. You didn’t think the banks were going to pay those new regulation fees out of pocket, did you?

Related Posts:

• How to Find the Best Place To Put Your Savings.
• HSBC is Closing its Local Branch. Should I be Concerned?
• Why Do You Bank Online?
• High Yield CDs (FDIC Insured) For March, 2010.
• ING Direct Orange Savings Referral Links.

High Yield CDs (FDIC Insured) For March, 2010.

All the banks or credit unions offering these CDs have at least a 3 star rating from BankRate.com, which means it is at least average in it’s “safe and Sound”® rating. Here’s the full rating system:

Safe & Sound® rating system

1 Month CDs

3 Month CDs

6 Month CDs

9 Month CDs

12 Month CDs

5-Year CDs

Some observations…

Obviously, you’re going to earn more interest the longer you lock your money up but It’s interesting to see that the difference between 6 and 9 month CDs is negligible – and in the case of Ally Bank’s 6 month CD, you actually earn more than other 9 month CDs!

Also, some names appear multiple times. Ally Bank, for instance, is consistently on the high yield list, while other banks appear at different ends of the maturation spectrum. It makes me wonder how they can afford to offer high yielding CDs in all these maturity levels. I could see where Allstate Bank for example can offer high yields on short maturities, and either make the money up on their longer maturity offerings, or just by other long term investments they hold.

And lastly, it’s obviously not a savers market out there. This should come as no surprise, since the federal funds rate (the rate that banks are charged for the money) is virtually nil. The incentive is to borrow and spend, not save. This will turn around some day, which is the major reason not to tie your money up in long term CDs.

Source: Bankrate.com

Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration. Bankrate.com rates banks, thrifts and credit unions through proprietary Safe & Sound star rating system. Rates are subject to change without notice and may vary from branch to branch.

Related Posts:

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• CD Rate Roundup – Best Bank CD Rates in May

ING Direct Orange Savings Referral Links.

Pay yourself first – and here’s $25.00 free!

By now you’ve probably heard of ING Direct and their orange savings account… Maybe you’ve seen their clever commercials with a person sitting on a park bench with the letters “ING” visible to their right. It looks like they’re obscuring the rest of the word, and a voice-over says something like: “Is it a beginning, or is it an ending?” Only it’s more clever than that, but you get the point.

Or maybe you’ve just seen their ugly orange banner ads on the interweb. I don’t know why they chose orange as their color, but it’s so well done that I find myself associating the color with saving money unconsciously. Unlike UPS’ “What can brown do for you?” which is about the stupidest marketing campaign I’ve seen in years – are they changing their name from United Parcel Service to Brown? But I digress…

ING direct offers a high interest savings account. The yield is about 3.40% APY (at the time of this post) and it is FDIC insured, unlike a Money Market Account. It’s not the highest rate around to be sure, but it is just about universally hailed as the best user interface in online banking. They make it so easy to set up an orange savings account or CD that many people keep multiple accounts for everything from yearly car insurance premiums to property tax to general savings to a “new car fund” – you name it! Literally. You just create an account, give it a name and fund it with a deposit.

They make paying yourself first a snap with scheduled automatic deposits. That’s why so many people make it their first serious savings haven when they’re building their emergency fund and starting out on the American dream of building wealth and financial freedom. Another great thing about ING is that they offer referrals.

Yup, that’s right, I refer you and you open an orange savings account then we both get a little extra $$. If you open this account with an initial deposit of at least $250, you will receive a $25 bonus and I will get a $10 thank you bonus. To qualify for this bonus, you must use one of the links below.

Rules of the game: Bonuses are only paid for accounts that are opened with an initial deposit of at least $250. Initial deposit does not include bonus. The $25 bonus is available only for new accounts with a new Customer as primary owner. Only one bonus will be provided per household. Bonus starts earning interest upon account opening, but is unavailable for withdrawal for 30 days.

ING Orange Savings Referral

ING Orange Savings Referral

ING Orange Savings Referral

ING Orange Savings Referral

(If the links no longer work, you can try http://simpledebtfreefinance.com/ing-referrals-free-25/)

Open an ING account and get $25! And of course, if you decide that you’d rather not begin building wealth for yourself and start down the path to freedom, that’s OK too.

Related Posts:

• How to Find the Best Place To Put Your Savings.
• Best High Yield Savings Account Rates Of 2011.
• Capital One to buy ING Online.. So Long ING?
• High Yield CDs (FDIC Insured) For March, 2010.
• HSBC Direct Increased its Rate!