Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
And yes, the savings account is an online account that is not as easily accessible as our regular checking account.
Given you're spending history, I would recommend that you put this emergency money in an account that is even less accessible than it currently is, i.e., one that's NOT online. I've learned this hard way myself. Our emergency account is now in a brick and mortar bank that cannot be accessed online. I can only get at the money if I walk into the bank and make a withdrawal (or use the ATM card which has a low daily limit).
I would only start diversifying emergency savings and worrying about the interest when you have at least three months of living expenses built up. Despite offering higher interest rates, online savings accounts are generally too easy to access for all but the most disciplined people. All it takes is a few clicks to transfer that money into a checking account.
If both of you are working and can live with one income, I'd payoff the debt.
If you payoff, you will save $699 (=$10k * 6.99%) a year. Instead, if you save, you will earn $150 interest (assuming 1.5% online savings interest rate). By paying off, you are $550/yr better off.
But if you are uncertain about your job, I agree with others that you should put 50% in savings and use the other 50% to payoff.
Suggestion, when you *do* pay off any of the loans, take your payment amount and start throwing it into some kind of savings.
Believe me, we will DEFINITELY be putting our payment amounts into savings. Ummm...we're paying $5000+ a month towards debt (not because we have to, because we want to pay it off faster)...that money would serve us well in savings/investments!!
We recently inherited $10k cash when my aunt passed away. It's been sitting in my parents bank account (overseas), and now we're having it transferred over to us. What would you do with the extra cash?
A little bit about our financial situation...
- due to being young and foolish, we are currently aggressively paying down a large amount (~$60k) of debt. The debt is all low interest (the highest we have is 6.99% on one CC), and includes two car loans. It is scheduled to be paid off by June 2011, but that will probably happen sooner.
- We have ~$30k in investments (401k, & some stock), and a measly $1k in savings (focusing on the debt before contributing to a 2% savings account)
- We are young (25 & 29)
So, what would you do in our situation? Keep the $10k in the savings account in case of emergency? Pay down a large chunk of the debt? Invest in some more shares?
You already have a plan in place to pay off your debt in a couple of years. I would put it in an online savings account. Cash is king.
I would use half for bills and try to save the rest for an emergency fund. Try to simplify your lifestyle now, that way if you lose your job you're not worried sick about how you're going to pay your bills (aside from your debt).
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
