Savings Accounts

[January-2007]

We want to start a savings account so we can save towards buying our first house. We are going to talk with our local bank soon about their savings account options, but I was also wondering if anyone has ever used "ING" Direct Savings accounts. I used to see ads on tv for that company a lot but I don't really know anything about it.

We are 23, just got married in January, moved to our current ick apartment in February, and have a $10,000 nest egg we would like to see grow so we can buy a house and start a family within the next few years. Any advice for me?

[MissStyles]

I just sent you a pm.

[offwego]

With that amount you may want to be sure that an account is right for you. (I'm Cdn so may use the wrong word a time or too).

CD's (certificate of deposit I think) may offer a better rate of return, and you can stagger when they mature so you'd have access to some of them on a more frequent basis. (also often refered to as laddering).

Also in Canada (again don't know if this is similiar) a first time home buyer can use funds from their RRSP (like your 401K plans I think) and not pay taxes as long as they pay them back over the first 12 years of home ownership, thus you get the save in the plan, reduce taxes, and are "forced" to continue your good savings habits.

ING or similiar can be great, however be realistic about what works best for your savings habits, a savings hooked up to your chequeing with an automatic transfer on payday can be more effective then a savings that you have to "remember" to transfer to on line.

When discussing this with your bank, you really want to speak to some who offers "financial planning" so they can refine your plans (and your budget) with you to map out a route to your family and homeownership goals (and take into account potential changes such as a reduced income or increase in income once school is finished etc).

Good luck!!

[Mickey'sGirl]

I agree with Natalie. If you have a nice chunk of money that you would like to invest for the short term, I would talk to your Financial Planner/Banker about investments they offer. While easy to make payments into savings accounts are terrific for saving money -- I don't know if I would want to use them for parking larger amounts for a set amount of time. What about doing both? I used to work for an ING company -- and their products are sound...I just don't think they are for everyone and every purpose. Talk to your banker. :thumbsup:

[bleukarma]

My best friend has an ING savings account and she loves it! She likes the fact that it's an internet savings so its not as easy to walk into a bank and draw money out. She's less tempted to dip into her savings account this way.

I do agree with other posters, you might want to park your $10,000 into a CD. Talk to a financial planner at the bank, they will be happy to tell you what is best to do with the money.

[thrillme]

Be sure to look carefully at the CD's sometimes 1 year CD's pay more than 3 year CD's.

I know my bank offers something called a "future builders" plan. It's essentially a CD but you can withdraw out of it should need be without penalty. HOWEVER it's not available via "check" or "ATM"...You HAVE to go to the bank and make your withdrawal.

I dispise going to the bank to get my money because I have all the patience of a two year old. So...unless I MUST have it..

[poeticeclipse]

I may be able to offer you some useful advice since I work for a bank. In fact, i'm at work right now. hehe:thedolls:

With 10 grand, I would start looking into your options now but not commit just yet. It really depends on when you want to buy a home and if it's soon, just disregard CD's and look into a savings account that provides you with a higher interest rate. I know where I work, we have multiple savings accounts and some are tiered. If you have 0-10,000.00 you get a certain rate. But, if you keep over 10,000.00, you will get a much higher interest rate. Just make sure you don't fall below that because then you will fall into the lower interest rate bracket. You have to be disciplined if you choose to use a savings since you would still have access to it and you may be more tempted to use it before house buying time comes around.

If you don't want to buy a house for a few more years. I would say go for a CD. The interest rates are much higher for CD's than savings. Just remember, you don't want to break your contract and have to withdraw money from it. So, if you have just 10,000.00 and no extra. Don't put all 10,000.00 into a CD. Maybe 7500.00 in a CD and then the rest in a higher interest rate savings account.

If you sit down and talk to someone at the bank of your choice, they will be able to help you out and let you know about the products that they offer.

[SandmanGStefani24]

I work for one of the big banks, can't say who. (think west coast, stagecoaches, horses, ect) Anyway, I would ask your local bank what short term CD options or specials they have. Ours has a quick 5 monther that offers 5%. Every bank has something to that effect, especially with larger amounts like yours. Better still, try to become part of a credit union in your area. Credit unions will beat the big bank's rates 9 out of 10 times, so they are usually the best option. Just do a little rate shopping and whatever you do, pick shorter terms to ensure if something better pops up, or something happens where you need that money you can access it without too much hassle or fee. Hope this helps!
:beer:

[robhink]

I've got both a Savings Account and CD with ING Direct, I have not had any issues with them so far. Their rates are really good compared to my local bank, I'm getting 4.50 APY on the savings, if I wanted to get that at the local bank I'd have to put a million dollars in a money market account and I just don't have kind of money yet :)

[Ian]

We have an ING account and we like it, but I agree with the others that you should probably look more towards a CD with that kind of cash.

Unless you're planning on buying a home in under 6 months, a savings account probably isn't the way to go for you.

[crazykids]

I've been w/ ING for at least 4 years now, I think they're great! I have both a savings account & CD w/ them. They have good rates on short term CD's, but the regular savings account pays pretty good interest as well!

[January-2007]

First of all, :rocks: and a big thanks to everyone who's replied so far, I really appreciate it!! We are so clueless about banking, can someone explain more in depth what a "CD" is? And when you say 5%, is that over the lifetime of that CD or every month, or what? We were going to put $500 of the money into a bill to close an account so we might only actually have $9500 to put into something. If that extra $500 really changes things though, we might reconsider. That's just what we've talked about. Thanks again, I felt kind of weird asking about it, but now I am sooo glad I did! You are amazing, helpful people, thank you!

[offwego]

A certificate of deposit is a "instrument" of investment (by insturment I mean you get a slip of paper with number, principal amount, rate of interest, term and maturity date as opposed to a statement everymonth or bank book). If it's purchased through a bank, credit union etc it will be eligble for insurance (against failure of the institution it's with).

Rates often change at the 10,000.00 mark so you'll want to look at how long the other 500.00 would take you to payoff the account (and at what rate) and what your difference in return will be.

the 5% (and most rates as they are posted) would refer to an annual rate of return. Many will allow you to have it paid monthly (thus compounding it as it's added to the principal) some may offer a better rate if you delay the payment till the maturity of the cd (the renewal date).

Given that much of this is new to you..I'd really say you need to book an appt. for a financial review. With a nest egg of that size your bank will be happy to spend the hour or two with you to explain it all. And ask questions. If the person doesn't want to answer them..ask for someone else.

[TikiGoddess]

The best thing we ever did was take a short investment course. My DH went to a financial planning seminar offered by the local community college and learned so much about how to handle money. It was also sponsored by an investment firm and they gave a free one-on-one session at the end of the seminar (trying to get business!) but DH knew that going in and took all the advice with a grain of salt.

Best of luck!
TikiG

[January-2007]

Hi! I just wanted to give a quick update on what we ended up doing. We opened a 6 month CD for $5,000 with 5%. We put the rest into a regular savings account for now. We'll see how much more we can save and if the 5% special lasts longer who knows, but that's what we did for now. The idea of not having access to the money kind of freaked us out a little so that's why we put so little into the CD when we were originally going to put in more. Once this one matures we will probably put in more next time. We just went through our local bank. Thanks for all the information, I really really appreciated it. We feel good about this, and it's a step toward the future. So thanks again.