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We're car payment free, and just about COMPLETELY credit card free, (YAY!)
At the moment, we maintain about 1000 dollars in our checking account for minor emergencies, and now that we've paid off our "stupid stuff", we're ready to start the big emergency fund. What is the best account to have for that?
The tellers at Wells Fargo keep trying to get us to start a savings account with them, but I've heard it's better to go with a credit union or smaller bank? I've also heard of a money market account?
Just for the record, we rent, so we're also going to be starting a separate account to save for a possible down payment for something, maybe.
Oh yeah, we're also increasing hubby's 401 K contribution.
For an emergency fund, I would think that you should have the money availability as liquid, so I would suggest just keeping it in a savings account. While I prefer credit unions (I'm a member), I actually keep a separate account with ING Direct. Now ING has been taken over by Capital One, so I don't know what CapOne is going to do, so I may be transferring my money out, but they have been good so far. They had a decent rate on savings accounts. It's so easy to just connect the two accounts together and transfer your money between them.
I have not used an ATM in years, I just use debit and get cash back when I need it, some grocery stores allow you to get $200 back from a debit transaction. I say that because I don't know how important ATMs are to you, and since I don't use them, I can't list the pros or cons if you go with a credit union or ING.
I would say go with ING Direct. They were bought by Capital One last year, but the service and products hasn't changed much. They have free checking and savings with good rates on both. It's easy to create multiple savings accounts for your goals too, that you can even name. For example, I had one for saving a down payment on a house, and one for my emergency fund. I have been with them for 3 years and like them.
If you decide to get a checking account with them also, they have check deposit through your smart phone, and a huge free network of ATMs to go to, with a locator on the app. If you decide you want them, I can give you a referral link where you get $25 if you deposit $300 or more initial balance into a savings account you open.
We're car payment free, and just about COMPLETELY credit card free, (YAY!)
At the moment, we maintain about 1000 dollars in our checking account for minor emergencies, and now that we've paid off our "stupid stuff", we're ready to start the big emergency fund. What is the best account to have for that?
The tellers at Wells Fargo keep trying to get us to start a savings account with them, but I've heard it's better to go with a credit union or smaller bank? I've also heard of a money market account?
Just for the record, we rent, so we're also going to be starting a separate account to save for a possible down payment for something, maybe.
Oh yeah, we're also increasing hubby's 401 K contribution.
Thanks for any input!
A highly liquid FDIC or NCUA insured savings account - you want liquidity, safety of principal and to know the money is there when you need it. This account will likely pay very little in interest unfortunately. For the house fund, you can buy individual certificates of deposit - also insured, that can mature in as little as 3 months but will likely pay a higher rate of interest. View some of the online banks like AllyBank or Discoverbank - again, all FDIC insured, it does not have to be at Wells Fargo which pays jack on their CD's.
I'm a fan of having the fund broken up into several chunks...
ie: the amount you need monthly or quarterly rather than having it all in one big pile.
Additionally, I'm a fan of making it cumbersome to access the money once deposited.
Not impossible to get... but difficult enough to encourage you to find OTHER money first.
To these ends... laddered CD's with quarterly maturity will work very well.
They'll usually have the best rate for that class of deposit as well.
Ally bank is a good place for a savings acct. And Scwhab has a free checking acct. that pays decent interest and you can use the debit card at ANY banks ATM and Scwhab will reimburse the fee.
Just to let you know there is hardly anything "high interest" anymore. All savings accounts, CDs, and Money Markets have very little interest. I would suggest you pick something that caters to your individual usage needs, and is conveniently located. You would save more in gas then you would make in interest traveling to somewhere that is on your way to work or using an existing bank.
With that said, I would choose a savings account or money market with your current bank. Most money markets only allow a certain number of transactions per month (usually 3). Some may even charge you for your initial checks, etc.
I have a savings account and checking account with Chase. I can do online transfers from the savings to checking completely for free. This means I only need to buy 1 book of checks, and I can always use my debit for free if I need the money. Don't try to increase your interest, instead try to decrease your expenses when looking to open an account. At least until you generate enough savings for an emergency fund, after that I would look into investing with your cash that doesn't need liquidity.
I recently set up my emergency fund in an Ally "High Yield" Money Market Account. The interest rate (currently 0.95%) was about 6x higher than my Bank of America MMA, and better than some CDs but with full liquidity. Of course, the ally rate is still <1%, so I'm not making much more in interest but still, if you're going to put it somewhere, might as well get what you can. There is no minimum balance or maintenance fee, unless you withdraw more too many times a month (6 is the limit I think). It's also FDIC insured, that's a must for any emergency fund account.
The downside with an online bank like Ally is that transfers typically take a couple days to process, and you can't just walk over to the local branch to make a withdrawal if you need it. But with the MMA account you can get checks and a debit card so you have the ability to access the money immediately if needed.
Whether you go with an online or brick and mortar bank, I recommend putting your emergency fund in a separate bank from your checking account. If you don't see the fund everytime you check your account online, you're less tempted to pull from it to buy that cool new TV.
Thank you all for the replies!
I'll have to re read them all again and decipher the code! (There's GOT to be a finance for Dummy's book somewhere)
Actually, there's good info here, and I'm sure I could go to my bank, or another bank and ask further questions. At least this gives me a starting point.
Since there's the possibility we may eventually buy a condo or something, I've heard it's best not to change checking accounts if possible?
Thanks again, helps a lot!
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Thanks!
