25 February 2010
How to get a slightly higher interest rate on your savings account
As you can see above, I am very close to reaching my goal for an emergency fund. Early last year, I began a bit of a modified version of the Dave Ramsey Plan and I am currently working on Baby Step 3: Three to Six months of expenses in an emergency fund.
Since I planned to keep a significant amount of cash tied up in a savings account for easy access, I decided that I should find the best place to keep my money as far as interest rates are concerned. BankRate shows that some banks are currently offering as much as 1.4% interest on savings accounts, but I have not heard of many of them and some have fees or minimum deposit amounts. I have heard of many banks offering as low as half of a percent or even less.
SmartyPig
I’ll first talk about a very novel approach to savings that I discovered a year ago when I started this process. The site is called SmartyPig (which I blogged about at the time) and it’s billed as a social networking savings site, although I don’t have any friends there. Basically, you start by creating a goal, say a new used car for $11,000 and you’d like to buy it three years from now. Once you enter your information, it will recommend that you make a monthly deposit of just under $300. You then link this goal to another bank account and on the day of the month you select, that amount will be automatically transferred to your SmartyPig account every month. Any time you want to make an extra addition, you can do that manually as well. The percentage that you see at the top of this post is displayed in a widget that you can create on their site. You can even link your goals to Facebook or Twitter and allow your friends and family to help with your goal.
When I opened the account a year ago, the interest rate was just over 3%, but with the falling interest rates, it is now down to 2%, which is still significantly above any other bank I have seen. Another benefit is the ability to redeem your money either with a bank transfer, a cash/debit card, or even store gift cards with a bonus up to 12%. Let’s say that you are saving $2,000 for new living room furniture and you plan to buy at Macy’s. You can redeem your $2,000 in savings for a Macy’s gift card worth $2240, an instant 12% bonus. You can even split it between several different cards as well as a deposit to your bank account. Even though they tout that they are a social networking site, they do not offer any referral program, so there is not a strong incentive to get friends to sign up besides the novel idea of it all.
ING Direct
My other online bank account is with ING Direct. I have several accounts with them including multiple savings accounts, CD’s and a checking account. My children have their own accounts set up online here as well. Setting up a new account for each savings goal is not a problem. Once my goal is reached at SmartyPig, I will transfer the funds to ING to be held for the long term. ING’s rate is very competitive and it used to be one of the best available. Two Years ago, it was 3.59% and if I remember correctly, it was around 5% when I started in 2005, but now is down to 1.15%. Although the rates aren’t the highest, very few, if any of the other banks can match the convenience and features of ING. Having been a customer since 2005, I have a high comfort level with their services.
They also have another site that I haven’t checked out too much, but it is geared towards teaching children about earning, spending, saving and investing. It is called Orange Kids and looks interesting.
ING does offer a referral program that normally pays you $10 when a friend signs up. Through March 31st, they are having a deal where you get double the bonus ($20) and the friend gets $25 in their account as well. They want to make sure that you don’t spam, so they require you to enter the friend’s e-mail on their site and they will then send a link to sign up. If anyone is interested in getting more information about this $25 bonus and helping me out, send me your e-mail address and I will get a link sent to you ASAP.
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2 Comments currently posted.
Chris Sumpter says:
matthew says:
@Chris Sumpter – Done
Hey, I’ve been thinking about getting the boys their own accounts. Send me the details and I might be able to hook you up.