Savings in the News: July 6, 2009

I hope everyone had a great Independence Day weekend. Now that most of us are back to work, we're also back to thinking about savings. Here are some articles about savings accounts that caught my eye recently.

The Charlotte Observer has an article about different savings plans in light of recent economic difficulties. One person profiled discussed using gold coins to pay off his credit cards!

Construction worker Tony Anthony, 54, saves when he can but says he doesn't do it systematically. He has a 401(k), but mainly deposits money into a savings account so he can reach it if he needs it in a couple months. For instant access to cash? Anthony gets 10 one-dollar gold coins out of the bank each month and puts them in an 18-inch copper piggy bank. That's come in handy when he needs to pay off credit card debt immediately.

“I recently paid the credit card company $1,265 with the gold coins,” he said.


Meanwhile, the Four Pillars blog has an article on the benefits of an online high-yield savings account (such as the ones you can acquire through MoneyAisle):

One of the times in your life when you might have a lot of cash is when you are saving up a down payment for a house. Sums like $10,000, $25,000, $50,000 are not unreasonable for someone who has been saving for a while. In this scenario we have savings of $35,000 and we are going to buy a house in exactly 1 year. Should you be happy with getting 1.0% from your bank or should you shop around for a higher rate of around 2%?

Saving Money by Bringing Lunch to Work

Over at the Save More Money blog, James is planning on putting his money where his, uh, mouth is by not buying anything out of vending machines, and bringing his lunch and a snack to work:

My first 30 Day Challenge is to not buy any food from vending machines, variety stores or even fast food or take out food. If I manage to do so without spending a dime, I should be able to save from $136 to $205 a month. With this challenge I could save for my family from $1632 to $2460 a year.

That's an impressive amount, and if the money is invested in a High-Yield Savings account with a good APY, the interest earned will add even more to the savings.

Savings Account News for June 26, 2009

Here's a round-up of some interesting recent articles involving savings accounts from the past few days.

The Examiner lays it all out for people of every economic stripe with this article:

You are not too poor for a Financial Plan.

But most people are richer than they know. When we get them to look at valuable things that can be sold or converted to money, you can see the Financial Planning light go on. Your car, the grandfather clock in the corner, the books in your library, and even the clothes in your dresser should be thought of as "money", and be considered in your Financial Plan. Think about replacing these items if your house burned down and you did not have the properly designed home owners insurance. You'll need cold, hard cash for that new underwear. Sadly, people fail to see the value in everyday items until they need to replaced.

Over at the Wall Street Journal, Sudeep Reddy goes over the Obama administration's effort to protect the personal finances of Americans and what it means for most people's savings:

The Obama budget proposal includes plans to require employers who don't offer a 401(k) or similar retirement savings account to automatically enroll workers in individual retirement accounts, siphoning deposits directly from their paychecks. The program is aimed at the half of all working Americans -- roughly 75 million people -- who don't have a retirement plan other than Social Security.

Speaking of the Obama admistration, CNN Money has an article about how the recent stimulus package has affected personal income, spending and saving:

Taking inflation into account, the spending rate rose by 0.2%. This so-called PCE Core was higher than the 0.1% rate that economists were expecting.

Even as consumers spent some of their extra dollars, they were more interested in socking away cash than they have been in more than a decade.

Latvian firm accepts souls as guarantee for credits

Here's a slightly more offbeat story than we usually cover here at the MoneyAisle blog: according to MosNews, a financial company in Latvia is offering residents loans secured by nothing but their immortal soul.

Riga-based firm, named Kontora, does not require credit history record or proof of employment. It grants loans of 50 to 500 Latvian lats ($100 to $1,000) to any adult after he or she signs the a very short agreement.

According to the agreement, the only security required of the borrower is their immortal soul, which they are asked to confirm as their previously unmortgaged property.

The loan is subject to one percent per day in interest until full repayment.

The period of full repayment is 90 days, and in case the borrower fails to return the money, the creditor gets full possession of his soul.

I don't what's stranger - the soul business or 1 percent interest per day on a loan!

Stagger CDs for Biggest Benefit

The Associated Press "Your Money" column tackled an interesting question about how to get the best return on CDs over the long term today.

Question: I would like to get a long-term CD for my grandsons but have no idea how to start. Can you please help? - L.G., Perris, Calif.

Answer: To avoid locking up all of the money you have to invest at a low rate, consider "laddering" the CDs. This entails staggering the maturity dates of several CDs so you always have at least a portion of your funds near at hand.

So if you want to invest $5,000 for one grandchild, you might put $1,000 in a one-year CD, $1,000 in a two-year CD and so on, with your final $1,000 in a five-year CD.

When the one-year CD matures, you reinvest it in a five-year CD. By that time, the other CDs are each a year closer to maturity; the longest you have to wait at any time for a portion of your money to become available is one year.

This strategy lets you take advantage of the higher interest rates typically offered for longer-term CDs. At the same time, you're not locking up all your money at once.

One excellent way to ladder CDs instantly (ensuring great rates for each CD duration) is by using the CD Laddering function at MoneyAisle.com - the only one of its kind.

When Saving Weigh Safety, Liquidity, Yield

The savings rate in America, which was about zero just a few years ago, is now exceeding 5 percent, according to the federal Bureau of Economic Analysis.

As the Pittsburgh Post-Gazette says:

But now that we're finally saving more, savings account rates are close to record lows. Bank savings accounts and money market funds are yielding below 1 percent. Even a bank CD for one year pays only about a measly 1 percent.

The Post-Gazette's claim is true if you're looking for cd rates or savings accounts in your backyard or neighborhood. However, with the advent of the Internet there are new ways and avenues to maximize the return on your savings. Paying down debt and building up a savings cushion for emergencies is one of the best things you can do no matter what the economic conditions, but you shouldn't have to settle for interest rates with a low yield while waiting to see which direction interest rates are headed.

MoneyAisle.com was designed to help you get better rates on your savings through FDIC-insured accounts. Check out our rates for yourself by running a live rate auction on the site and compare it to the 1% yields listed above.

When opening a savings account consider the following criteria:

Safety:

High-Yield bonds may get you a higher return, but they invest in corporations with poor credit ratings. And some analysts believe that many may go belly up this year. FDIC-insured accounts are insured up to $250,000 per depositor per institution.

Liquidity

If you're saving for emergencies you may need to get to your cash quickly. Most CDs have a penalty for early withdrawal, but that doesn't mean you should forgo certificates of deposit as a means of investing entirely. CD Laddering, where you stagger your deposits across several durations, gives you access to your funds at different intervals, and can help you guard against rising interest rates.

Additionally, High-Yield Savings accounts can give you great rates while providing you with easier access to your cash.

Yield

Balancing a great rate with account safety is one of the advantages of the MoneyAisle auction system: providing the consumer with the best of both savings worlds.


What factors do you consider when saving? Do you go with a higher-yielding CD or a High-Yield Savings account which gives you quicker access to your money?

MoneyAisle's BankBrowser: Expanded

Back in March, we put out a preview version of our BankBrowser. We're now ready to debut Phase Two of The MoneyAisle BankBrowser, covering every city, state, county and bank in the United States.

This is not the end, either: we're already working on getting more information on these pages regarding bank branches and financial facts from the cities, states, and counties across the U.S.

Which Way are Interest Rates Headed?

It's on the mind of consumers everywhere - those looking to refinance their mortgages, those looking to buy houses, and those looking for better rates on their deposit accounts: Which way are the interest rates headed?

According to a Bloomberg article, "U.S. mortgage applications fell last week to the lowest level since February as a jump in borrowing costs discouraged refinancing and signaled that Federal Reserve Chairman Ben S. Bernanke’s efforts to cap rates is stalling."

The San Francisco Chronicle (in the Net Worth column) also touches on the issue: "The funny thing is, investors can't decide which worries them most: that rates will rise too quickly and choke off a recovery, that rates will rise too slowly to offset the stimulus that has been poured into the economy and we'll end up with hyperinflation or that we will have both - a weak economy and high inflation."

And the Wall Street Journal is also weighing in: "Here we stand more than a year into a grave economic crisis with a projected budget deficit of 13% of GDP. That's more than twice the size of the next largest deficit since World War II. And this projected deficit is the culmination of a year when the federal government, at taxpayers' expense, acquired enormous stakes in the banking, auto, mortgage, health-care and insurance industries."

Now We Are One

It was one year ago today - June 9, 2008 - that MoneyAisle came into existence. One year of getting consumers great savings account and CD rates! We've grown a lot and introduced a ton of great new features over the past year - CD Laddering, Advanced Features, support for businesses and organizations to name just a few - but our mission remains the same: using the spirit of competition to get you the best deals by having sellers bid against each other in live auctions, lifting the buyer's burden to find the best deals.

It's been an amazing year, and we've got even bigger things planned for our second year of existence. Watch this space and remember: when sellers bid, buyers win.

Welcome, AARP Members

We've been getting a lot of visitors from two articles posted in the AARP Bulletin and on their Website - the more recent of the two is in the Personal Finance section of their site:

Seven Ways to Beat the Bank

Bank deregulation has produced a highly competitive environment with widely differing interest rates. If you can find a better deal than your present bank is offering, take it. A new website called MoneyAisle makes it easy to compare CD rates from scores of banks in an automated auction.

One user, Lynda G. from Massachusetts, spoke with us a bit about how MoneyAisle worked for her:

On how computer-literate she is:

"I am able to search the internet for personal and business reasons on a daily basis. I use Microsoft word and email. That's as savvy as I get!!"

Her thoughts on MoneyAisle:

"Extremely easy! I did a trial auction to see how it worked and then proceeded to look for the best rate for a 1 yr. CD."

Her thoughts on dealing with the winning bank to open her new account:

"The bank contacted me by email and I wired the funds from my savings acct. to them. They, in turn, emailed me the paperwork and it was done."

Thanks to Lynda for speaking with us about MoneyAisle - if you recently used MoneyAisle (whether you're visiting from the AARP or not) and would like to share your thoughts on the MoneyAisle experience (we'll only print your first name and state in the interest of consumer protection), we would love to hear from you. Just send an email to share@moneyaisle.com.