Savings

[Big G]

Once again, I’m reading about online saving accounts interest rates and thinking of switching. HSBC has a promotion of 6% for new deposits from the Jan 1st to April 30th. After the promotion it goes back to 5.05% currently I am earning 4.5% with ING direct. I’m thinking it would be worth opening an account with HSBC to take advantage of the 6% rate and leave my money over there for the higher rate. Is it worth switching?

Also, what else should I be doing with my Money? I currently save 5% to my 401(k) 3% to an employee stock purchase plan and $100 a paycheck to a savings account.

Thanks,
Big G

[sweeps]

If you're leaving the money at HSBC, then definitely you will do better over the long-term than with ING. But in the short term you will give up some interest... use this calculator:Rate Chaser Calculator

1. Build up a small emergency fund if you don't have one already.
2. Do you have any debt? Consider paying it off from highest interest rate to lowest.
3. Increase your emergency fund, preferable to 6 months of expenses.
4. Increase your 401k contributions, or better yet, fund a Roth IRA.
Note these are just guidelines, everyone's goals and needs may be different.

[Big G]

I have some debt which I'm paying off as I can. I have one credit card and that will be paid off when my tax return comes in. I just paid off my car, now all I have left is student loans. I consolidated all my federal loans but I can't find anyone who will give me a fixed rate consolidation loan to get all my student loans into one payment.

Why would I lose interest in the short term by moving to a higher rate account? I don't have a lot in my savings (around $1000). I would have to say my savings account would be my emergency fund.

[sweeps]

Originally Posted by Big G

Why would I lose interest in the short term by moving to a higher rate account? I don't have a lot in my savings (around $1000).

Because it may take up to a week or two for the money to transfer. During that time in transit, you earn no interest. It takes a while -- longer than most people think -- to make up for that lost interest.

[jIM_Ohio]

Originally Posted by Big G

Once again, I’m reading about online saving accounts interest rates and thinking of switching. HSBC has a promotion of 6% for new deposits from the Jan 1st to April 30th. After the promotion it goes back to 5.05% currently I am earning 4.5% with ING direct. I’m thinking it would be worth opening an account with HSBC to take advantage of the 6% rate and leave my money over there for the higher rate. Is it worth switching?

Also, what else should I be doing with my Money? I currently save 5% to my 401(k) 3% to an employee stock purchase plan and $100 a paycheck to a savings account.

Thanks,
Big G

With the debt you describe, keeping money in a savings account is "losing ground". What is the balance on each of your student loans? My experience is with $25 extra, it is easy to snow ball these and get them paid off.

I graduated with ~60k in student loand debt, 4 payments (200/mo for two, 100mo for one other and $325 for 7-8 stafford loans combined into one). Keeping them seperated paid them off quicker. I paid $5 extra on the $200/mo loans, then upped this to $25/mo extra and within a year the minimum payment dropped to $175, then a year later the minimum dropped to $150... then I got a vacation buyout paid one of them off. Then paid $400/mo to the other, then paid $500/mo to the next, then paid off the stafford loans soon after.

Took me 7 years to get $800/mo disposable income into my budget.

I'd get the 401k up to 10% if possible.
Then I'd look to pay down the debt.
Once the debt is paid off, I'd consider a Roth IRA.

[Big G]

I'm already paying more then is currently due each month on the loans. My loan amounts per month are:
1. $150 (should only be paying $140)
2. $155 (should only be paying $150)
3. $325 (should only be paying $320) This one is a variable rate so the amount due keeps changing.

Saving money might not be the best idea, but oddly it makes me feel better that I've got a little tucked away in a savings account and some in the stock market.

[HiImSeth]

Originally Posted by sweeps

Because it may take up to a week or two for the money to transfer. During that time in transit, you earn no interest. It takes a while -- longer than most people think -- to make up for that lost interest.

This is very true, I recently did the same change.. from ING to HSBC. But I first funded my HSBC account with $100 from our checking. Once the account was fully established and I was able to login I initiated a transfer on HSBC site from my linked ING account to transfer over the ING balance. This particular transfer took about 4 or 5 days. About 3 of those were days where the money was in between accounts making no interest.

Either way, it was worth it I think.. But by the time you get your HSBC account completely setup (they use snail mail for your first time userid) and your ING balance over to HSBC they may be almost done with the promo. =]

[Big G]

Originally Posted by HiImSeth

This is very true, I recently did the same change.. from ING to HSBC. But I first funded my HSBC account with $100 from our checking. Once the account was fully established and I was able to login I initiated a transfer on HSBC site from my linked ING account to transfer over the ING balance. This particular transfer took about 4 or 5 days. About 3 of those were days where the money was in between accounts making no interest.

Either way, it was worth it I think.. But by the time you get your HSBC account completely setup (they use snail mail for your first time userid) and your ING balance over to HSBC they may be almost done with the promo. =]

While it's been brought up that saving money at this point doesn't do me much good, for some odd reason it makes me feel good to have some money earning interest in a savings account.

If we were to assume I would miss the HSBC promotion should I look to other online savings accounts to get a higher rate? The only things I need is the ability for my company to direct deposit and to link to my checking account. 5.05% sounds better to me then 4.50%

[sweeps]

Originally Posted by Big G

I'm already paying more then is currently due each month on the loans. My loan amounts per month are:
1. $150 (should only be paying $140)
2. $155 (should only be paying $150)
3. $325 (should only be paying $320) This one is a variable rate so the amount due keeps changing.

Saving money might not be the best idea, but oddly it makes me feel better that I've got a little tucked away in a savings account and some in the stock market.

I think it's a very good idea to have some cash saved even though you have pending debts. If an emergency comes up, you don't want to dip even further into credit cards.

I would change my strategy though in paying off the debts. Pay the minimum on all debts except for the one with the highest interest rate. Pay as much extra as you can on that one until it is paid off. Then go with the next one.

There are a few exceptions though. (1) If the interest rates of 2 debts are very close and one has a much smaller balance than the other, pay off the one with the small balance first -- mainly for psychological reasons. (2) If the interest rate of remaining debt is very low, then you might want to stash money in savings instead of paying it off. You can probably earn a better return and further boost your self-confidence. (Note that many here disagree with me on this point.)

[jIM_Ohio]

Originally Posted by Big G

While it's been brought up that saving money at this point doesn't do me much good, for some odd reason it makes me feel good to have some money earning interest in a savings account.

If we were to assume I would miss the HSBC promotion should I look to other online savings accounts to get a higher rate? The only things I need is the ability for my company to direct deposit and to link to my checking account. 5.05% sounds better to me then 4.50%

You feel good with cash in the bank. You might feel better when that $575 is disposable income. Don't know what you make, or what total debt is... but I'd think you could pay everything off in 5-6 years.

I would snow ball the $15 extra you are paying to one of the loans... (one of the $150 loans), then pay off the $325 loan second, then the other $150 loan third. When you pay off that first loan you will probably feel good.

$15 extra is one extra payment every 9 months. This will free up $150 of income quickly.

I went through my whole paydown without even having a savings account. I used CC to pay for my car repairs, pay for my emergencies (I drove an American car, so my car repair bills were 5 figures over 3 years).

I am of the opinion that people paying down debt cannot "afford" to keep cash around. The cash could best be put to work. Compounding works in reverse when paying down debt too.

I am debt averse... and the feeling I have now of having $1100/month going into IRA's beats the feeling of when I opened the first savings account or when I paid off that first student loan.

[Big G]

Originally Posted by jIM_Ohio

You feel good with cash in the bank. You might feel better when that $575 is disposable income. Don't know what you make, or what total debt is... but I'd think you could pay everything off in 5-6 years.

I would snow ball the $15 extra you are paying to one of the loans... (one of the $150 loans), then pay off the $325 loan second, then the other $150 loan third. When you pay off that first loan you will probably feel good.

$15 extra is one extra payment every 9 months. This will free up $150 of income quickly.

I went through my whole paydown without even having a savings account. I used CC to pay for my car repairs, pay for my emergencies (I drove an American car, so my car repair bills were 5 figures over 3 years).

I am of the opinion that people paying down debt cannot "afford" to keep cash around. The cash could best be put to work. Compounding works in reverse when paying down debt too.

I am debt averse... and the feeling I have now of having $1100/month going into IRA's beats the feeling of when I opened the first savings account or when I paid off that first student loan.

I agree with you about paying off debt, it was an awesome feeling when I paid off my car. Last year I made a little over $32,000 before deductions (health insurance, retirement, etc.) My $150 loans are fixed rate loans the $320 loan is an adjustable rate. What I could do it pay $400 on it and pay the only the amount due on the others.

I still want to have a savings account, but unsure if I should move over to HSBC for the 5.05%

[HiImSeth]

I'd move for the 5.05%. I was dragging my feet on doing it and their promo just went ahead and pushed me to do it but I woulda eventually done it anyways. .55% is enough for me to decide to change, especially since ING hasn't made any moves on their rate in a while to show that they cared to compete on rates. They (ING) do of course have a better user interface and customer service for sure.

[jIM_Ohio]

5.05% interest on $1000 is $50.50 per year. In 10 years the total amount will be $1636.

IF you use the $1000 to pay down the student loans... and get them all paid off within 5-6 years. In 3 months after the loans are paid off, your savings will be back to $1600.

This saved you 4-5 years of interest payments and got you the disposable income sooner.

Assuming you can accelerate payments and pay off loans 3 months earlier (than normal), you come out ahead with no savings.

[DebbieL]

If I transfer funds to or from my ING account, there is a hold (5 business days), but the amount shows up right away and they pay the interest right away even though the funds haven't "cleared" yet. I do this quite often between ING and my main bank account. I'm in Canada though, so maybe it's a different rule in the states?

[Big G]

Originally Posted by jIM_Ohio

5.05% interest on $1000 is $50.50 per year. In 10 years the total amount will be $1636.

IF you use the $1000 to pay down the student loans... and get them all paid off within 5-6 years. In 3 months after the loans are paid off, your savings will be back to $1600.

This saved you 4-5 years of interest payments and got you the disposable income sooner.

Assuming you can accelerate payments and pay off loans 3 months earlier (than normal), you come out ahead with no savings.

I agree that it's a good idea but I really want to have some money set aside in case of an emergency ... which is what I use the savings account as.

[autoxer]

Originally Posted by Big G

I'm already paying more then is currently due each month on the loans. My loan amounts per month are:
1. $150 (should only be paying $140)
2. $155 (should only be paying $150)
3. $325 (should only be paying $320) This one is a variable rate so the amount due keeps changing.

What are the interest rates on these loans? Instead of paying a little extra on each loan, why not focus all of the extra money on the loan with the highest interest rate?

[Big G]

Originally Posted by autoxer

What are the interest rates on these loans? Instead of paying a little extra on each loan, why not focus all of the extra money on the loan with the highest interest rate?

Someone else brought that up .... the 2 $150 loans are fixed rate so the amounts don't change ... the bigger one is variable. Since I just paid off my car and my credit card will be paid off with my tax return I will pay at least $400 a month on the big loan

[autoxer]

Does the bigger loan with a variable rate have a higher interest rate then the fixed rate loans?

[Big G]

Originally Posted by autoxer

Does the bigger loan with a variable rate have a higher interest rate then the fixed rate loans?

I don't have the info in front of me, but I'm 90% sure it does ... I know that the payment amounts have gone up on me a few times because of changes in interest rates where as the others have stayed the same.

[Savingmonster]

Originally Posted by Big G

I agree that it's a good idea but I really want to have some money set aside in case of an emergency ... which is what I use the savings account as.

I am in a situation very similar to yours.

I Have no CC card debts, and I am very proud of it. But I owe about 25,000 in Student loans.

I feel better saving and paying off the school loan debt slowly, Im taking my time with it. I am aware in the long run, it's going to cost me more, but its a great feeling having money in my savings account.

Since I am contributing a LOT to my savings account, I am confident I will be able to pay off my 25k loan in 7-10 yrs.

The thing is, when I start paying down on my loans aggressively (doubt or triple the min), I want to be sure I have 40-50k in my savings account when I am done.

SavingAdvice turned me into a Monster when It comes to saving lol, so you guys are to blame .

Again, I am aware, it will cost me a little bit more if I take my time. But I personally want SAVE aggressively for about 5 yrs, then I will start to pay down on my School loans very aggressively. In 5 yrs, My Bank account should be looking really good.