Advice for Savings Account Alternatives?

[Bk5580]

I have 30,000 in an ING Direct Orange Savings account. I know it seems foolish to keep it there but I plan on buying a house within the next two years so my main factor was liquidity and contractual obligations.

ING (and every other savings institution) has lowered the % interest greatly since I initially set up the account in 2007.

With liquidity being the focus. Are there any other better options out there or advice someone could give me on what to do with this lump sum? I understand the buyer's market that currently exists to buy a home but the facts are I'm not in the position to trap myself in my current city for a number of reason's I won't bother you with.

Time frame is roughly 2 years until I would need the money.

Any advice would be greatly appreciated. Thanks!!

[kv968]

Welcome BK,

Although saving accounts aren't paying much right now I think you'd best keeping the money there due to the time frame in which you need the money. Your only other real alternative to me would be to either get a couple more basis points by opening either a 6-month or 1-year CD or something like Vanguard's Short-Term Treasury Index (VFISX). However with the latter there's the chance that you could lose some principal and the SEC yield on it is currently only 0.94%. IMO, with the way the market is right now, I'd stick with the money market account or CD's. If you want to put a little in a short-term fund like the one above maybe, but not much.

[Ima saver]

I too would stick with a short term C.D.

[cooliemae]

Ally is offering 1.49% in their high yield (limited to 6 transactions per month).
Ally High Yield Savings

[jefffou]

Originally Posted by Bk5580

I understand the buyer's market that currently exists to buy a home but the facts are I'm not in the position to trap myself in my current city for a number of reason's I won't bother you with.

Just because the real estate market (or any other market for that matter) is currently below previous highs doesn't necessarily mean we're currently in a buyer's market.

Recent highs OR lows do not determine market value now.

I like you're thinking, though. Stay in cash.

Jeff

[frugalnoggin]

I might make two suggestions in this situation where your primary concerns are preservation of capital and liquidity.

1. Check out bankrate.com or a similar site for other options in online savings accounts that might have higher yields than your current ING account. You might be able to find an additional 0.5% or so.
2. Look for high yield checking accounts using a google search. These accounts usually yield around 5%, but impose restrictions. You will need to make 10 debit card transactions per month, one ETF deposit per month and receive electronic statements. You can usually set yourself up to automatically transfer in $100 from another account, then spend that $100 in small debit card transactions each month to meet the requirements. You may only be able to put $10-15K in this type of account, but it's a pretty good yield if you can do it.

If you can do both of these, you'll be earning more than you currently are with no additional risk and still maintaining 100% availability to your cash. You have to be VERY disciplined about that debit card though ! Only spend what you transfer in each month. Buy coffee, newspapers,etc. to get your 10 transactions.

Good luck, both with your savings plan and your home ownership.
FrugalNoggin

[Lumber Joe]

Originally Posted by Bk5580

I have 30,000 in an ING Direct Orange Savings account. I know it seems foolish to keep it there but I plan on buying a house within the next two years so my main factor was liquidity and contractual obligations.

ING (and every other savings institution) has lowered the % interest greatly since I initially set up the account in 2007.

With liquidity being the focus. Are there any other better options out there or advice someone could give me on what to do with this lump sum? I understand the buyer's market that currently exists to buy a home but the facts are I'm not in the position to trap myself in my current city for a number of reason's I won't bother you with.

Time frame is roughly 2 years until I would need the money.

Any advice would be greatly appreciated. Thanks!!

Yeah, I would also stick to short-term CD

[MonkeyMama]

I'd keep it in cash - 100%.

A short term CD, if it makes sense.

Ally bank has some decent savings rates. (I would certainly check bankrate.com, too).

Alliant Credit Union - if you can get in - has 2% on cash savings.

You aren't going to do much better without taking unnecessary risk. BUT, I think it is worth the effort to search out slightly higher rates.