I’ve been able to save some money over the last 18 months, and, rather than blowing it all which I’ve been known to do in the past, I’d like to put it somewhere out of the way yet still accessible. My first thought was a CD, which would be rather easy but not quite as accesible as I want. The other thing I thought of and that my father likes is a money market account. This would keep the money accessible, yet not just staring at me in the face, if you follow.
In either case I’m not going to get much of an interest rate, something in the 2-3%, but still far above the < 1% interest on my savings account.
I happen to be with Ford because my folks have had an account there forever (my dad works at Ford), since it was a money market account previously. I assume it’s essentially the same setup still. The nice thing about it is that it’s not tied to Ford automobiles, it’s tied to Ford credit. So even if Ford itself goes south, people will still be owing money to Ford credit. And if THAT goes under, some other bank will snap it up right quick. I pay 4.75% interest on my Ford Credit loan and I get 5.61% on my “loan” to them. Nice
You can beat 2-3% easily at the moment with online savings accounts. ING (4.50%) mentioned above and EmigrantDirect (5.05%) for example. Both of which I’ve used and have had no problems.
Another vote for ING. Another reason an internet only bank will be helpful, is that even if you want the money, it takes about 2-3 days to transfer back into your checking account.
If you have enough to open a brokerage account, and start messing around with stocks and mutual funds, I’d do that. You’ll find out quickly if you have any talent for it, and the returns can be much greater than savings. If you’re not good at it, or if you need the money (what ever is left of it, anyway ), it’s easily accessible.
Mutual funds. Give them your money, and let them grow it for you. I don’t know what the minimum investment level is where you are, but you can find that out easily. Also find out the charges for withdrawing your funds, as that can vary from fund to fund.
Ideally, you would divide your money between 2 or 3 funds so that your risk is minimised. Choose a fund based on its past performance, and your own risk appetite. Funds that invest heavily in equity will tend to give higher returns, but the chances of losing your money are also higher than in a fund that invest primarily in debt.
I’ve got my savings parked at GMAC. Interest is currently at 5.3%, it was super easy to open an account, transfers to my bank account take two days, and I have checks I can use if needed.
If you’re going to do this, and you’ve never invested before, I suggest that you do a lot of reading first. There are funds and there are funds and there are funds. Depending on the fund, the risk level can go from almost zilch to way, way over your head. And remember that past performance is absolutely no guarantee of future performance. Not by a very long shot. And there’s usually more to funds than meets the eye. Make sure you understand how the mutual fund company and the fund salesmen make their money. One way or another, it comes out of your pocket, and it’s best to know exactly how much you’re paying. There’s nothing wrong with funds, but you really should know what you’re doing before you invest.
I’d put the money in one of the accounts others have mentioned (ING at the very least), while you research funds and stocks and learn about investing.
Remember, you have to beat inflation to come out ahead on a savings account.
I too would vote for index, or mutual funds, but I disagree with Frank. This is a more of a great debate premise, but I don’t think anyone can be “good” at picking stocks or funds. If you enjoy it though, great.
Or, or write a bunch of naked options on orange juice futures. (just kidding)
Depends. Do you want to spend that money in the near/soon future? If so, go with an ING account or a Money Market type of deal. If not, go with mutual funds. If not, and you’re willing to risk the money a little, try your luck in the stock market.
If you want to do a little better than most money markets but still not take much risk you might consider what Consumers Union Money Letter suggested a couple of months ago.
Vanguard Short Term Bond Index might be worth considering (VBISX). They stick to quality and go out a bit longer than a money market. They can be cashed in whenever you want and are currently returning around 4.85%. Not a rate to write home about, but it beats inflation.
FatWallet has a thread for high-interest FDIC-insured liquid accounts (Checking, Savings, Money Market). FBNO is at the top of the list with a 6.0% promotional rate until Sept.
US Treasury Bills are another option. They are like CDs in that your money is locked up for a fixed term. They are 28-, 91-, 182-day T-bills. Backed by the US Gov. State-tax exempt, and equivalent APY can be comparable to high-yield savings accounts. More complicated than a savings account and must be purchased in $1000 increments using either a brokerage account or through TreasuryDirect http://treasurydirect.gov/.
Here’s were I keep my money.
WAMU Savings: 5.0%, instant transfer to/from checking, local branches.
GAMCBank MMA: 5.3%, ATM rebates, limited check writing.
HSBC 5.05%, for when I need no-fee access to cash outside the U.S.
ING Direct is ok. They popularized high-yield online savings accounts, but their rates haven’t been competitive for a while.
CDs are good, but, for me, the rates don’t justify locking my money up for 1 or more years.
), it’s easily accessible.