Its common wisdom that you should be putting money aside for a rainy day or an emergency. But where do you put that money to sit till you need it? To me there are to things to consider, making it work for you (interest) and liquidity (how fast can you get it). On the subject of interest you want to find the highest there is so that your money just dosent sit there. Otherwise the piggy bank on the shelf would meet both criteria quite well. These days though we all know that interest rates are practically non existent, hell I think my couch gives me a greater return than my checking account. Liquidity is important so when an emergency does arise you can have quick access to the money without paying penalties. That is why CD’s and stocks may not be your best bet for your emergency funds.
I currently bank with a local credit union and have enjoyed having all my accounts there, has made life easy. I have a money market account that I have been putting money into from the business account every month. It kind of serves as an emergency, tax fund, overdraft account, etc. It only offers .25% and only on balances above 10k (which I just got it to) and .15% for less. It is quite liquid, I can transfer or withdrawal from it right away if a need arose. Now having all my accounts under one house hasnt really earned me anything with them. I mean I tried a refinance a year or so ago thinking I would get a break cause the have all my money but noooooo. That and with the paltry interest rate on the savings I have started looking at other options.
Enter intranet banking. I have looked into them before but never pulled the trigger. The thing is with internet banks they dont have as much real estate (physical locations) or employees to support so they in turn can offer higher interest rates. But to me the down side is the liquidity. To access you need to transfer money back to your regular checking account and this can take a couple days. I guess short of a loan shark about to break your legs for payment a couple days is ok for most situations. Most internet banks are FDIC insured just like your bank down the street so its safe and secure.
I have found two such internet banks that ill share quickly for those that may be considering the same move. The first is ING (the orange savings) probably well known with there commercials and all. They offer 1% with no min, no fees and have been around for a while and are quite stable. The other is starting to appeal more to me, Capital One. Not to be out done they offer a 1.01% rate but on balances over 1K, still no fees. The kicker is that they are currently offering a bonus for accounts over 10k. On those accounts the give a quarterly 10% bonus on the interest you earned.
My thoughts though are in the big picture is it all worth the extra .75%. Well on the 10K deposit that is an extra $75 a year, $85 with capital one (in simplified numbers). Every little bit adds up right? I still have yet to move the money. Im thinking that perhaps ill keep 5-10K in my local money market for the more liquid and immediate emergencies and tax fund, and then work on putting 5-10k in an internet bank for that 6 months of expenses savings.
What are your thoughts and suggestions? Would like to know what you do or thinking of doing?
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