September 11, 2006

Doing more with my money

I think the thing that most makes me feel like an "adult" is having to manage my money. I make an "okay" living and I'm living with my father, both which allow me to fund my savings account regularly. Well-disciplined savings is not something that I took up until 2004, when I started saving up for my MINI Cooper, and of course I should have started sooner, but now I've hit a threshold that I feel pretty proud about.

But unfortunately, my money's been accumulating in a low-interest earning, basic credit union savings account. I just looked the rate up online and it's a pathetic 0.91% APY. In the last year I've had a few conversations about some of the online banking companies - the ones that aren't necessarily brick-and-mortar, and pass those savings along to their customers with higher interest yields. Just this weekend Erik mentioned Emigrant Direct. They're currently offering a 5.15% rate. Oh, and that's with a $1 minimum - and did I mention there were no fees?

I checked Emigrant Direct against ING Direct, and while ING seems to have a slicker online interface, the rates are lower - and right now my focus is on earning as much with the money I've saved up as I possibly can. And in addition to several people Erik works with, Suze Orman also recommends it, and I have faith in her recommendations.

For the uninitiated, here's how the online savings companies work (specifically Emigrant Direct, but they're all pretty much the same):

My new Emigrant Direct savings account is linked up to my regular personal checking account (I'm going to need to transfer most of my savings from my credit union account to the checking account to get it to the Emigrant account, but that's really just a walk across the street for me - no big deal at all). Once the funds are available in my checking account I can go online and set up the transfer on the Emigrant website. The transfer takes about 2 business days, and then that amount of money is not available for withdrawal for another 5 business days, but that's not a problem for me, either.

If I ever need to access the funds that are in the Emigrant account, I just go back online and set up a transfer from them back to my personal checking account. Again, this only takes a couple of days. A 5.15% APY (which, for Emigrant Direct is compounded DAILY and paid out on the last day of every month) means about an extra $42 per month on an initial deposit of $10,000. That's free money, right there. Taxable, of course, but free.

I can't believe I haven't set this up earlier. I think, like most, it seemed too good to be true, so I was waiting for the whole online savings thing to become more established. And, you know, it's FDIC insured, so there's really nothing super-bad that can happen with the money. So if you have a stash of money in a low-interest regular bank savings account, you might want to look at some other options out there.


posted by julie at September 11, 2006 11:21 AM

things people have said

We put all our wedding money in an ING account. It felt really responsible of us. I have never heard of Emigrant though that sounds like a great deal.

so said: Karin at September 11, 2006 01:11 PM



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