Newb Question (Savings)

[StormGreen]

Hey team.

I have about $20,000 in a checking account not making interest.

I was curious if I should put this in a savings account so I can being accruing interest?

How much do you think this will accrue yearly / monthly? Is it even worth my time since the money is taxed anyway?

Any advice is appreciated.

Cordially

Stormy

[disneysteve]

It depends where you put it. You can earn about 0.8% right now, maybe a bit more. So $20,000 at 0.8% for a year will earn $161 interest. That's a lot better than the zero dollars you are earning now. Yes, you have to pay taxes on that interest but even if $40 goes to taxes, that's still $120.

[kork13]

Unfortunately there aren't alot of good options right now for putting away cash and still getting a good, secure return. However, the paltry .5%-1% interest rates that savings accounts are earning is certainly much better than the 0.0% most regular checking accounts earn.

My question back to you is what do you have planned for this money? Are you planning to use it sometime in the next year? Is this your emergency fund? Or is this simply some extra cash that you've got hanging around and don't know what to do with it?

[StormGreen]

Damn those are some really disappointing numbers lol.

The money is basically inactive and I could invest.

But, I wouldn't want to make any risks.

I found a bank that offers .025% if it's over $25,000 so I guess that's not bad.

Was hoping for something better though.



What about CDs? What would you guys do with $20,000?

[kork13]

Personally? I'd invest it in a combination of federal I-Bonds, my GNMA mutual fund, and my high-div yield stock ETF... All of them are averaging ~2.5%-3.5% yield right now, and I'm comfortable with the risks involved in using them.

What YOU should do with it really depends on what you want/need it for and when you might need it, which goes back to my original question... What's this money for?

A CD or similar product (like my I-Bonds) are just fine if you are okay with locking the money away for a while. But if you're going to need it within the next year, those probably aren't good options for you. I have my immediate, short-term cash in a regular online savings account making just over 1%. It's a measly rate, but that's how it goes right now.

[StormGreen]

Personally? I'd invest it in a combination of federal I-Bonds, my GNMA mutual fund, and my high-div yield stock ETF... All of them are averaging ~2.5%-3.5% yield right now, and I'm comfortable with the risks involved in using them.

What YOU should do with it really depends on what you want/need it for and when you might need it, which goes back to my original question... What's this money for?

A CD or similar product (like my I-Bonds) are just fine if you are okay with locking the money away for a while. But if you're going to need it within the next year, those probably aren't good options for you. I have my immediate, short-term cash in a regular online savings account making just over 1%. It's a measly rate, but that's how it goes right now.

The money isn't really for anything. I have no plan.

I make money, but not very good with investing.

I fail.

[poorgradstudent]

There are also plenty of checking accounts that offer interest. My local credit union has 2% interest on checking accounts up to 25k. I don't keep all of my emergency fund there since I like to have most in a separate account that is slightly harder to access (wire transfer), but it is another option. Especially since you have it sitting in a checking account right now.

[bjl584]

Interest rates are non existant in savings accounts and CD's. What is this money for though? If it's longterm money then you can be a bit more risky with it.

[snafu]

Stormy I'm confused about your attitude towards risk. $20,000. in a checking account is losing at least 3% of buying power because inflation is nibbling away your money. Since you have no goal for this sum I wonder if you would consider a small,very limited investment plan. You could start with a savings a/c from one of the on-line, well known financial institutions with some of the money. You could open a no fee, low Management Expense Ratio [MER] Dividend Mutual Fund with a set monthly contribution called Dollar Cost Averaging. You won't see significant gains in the initial years but you will be investing in income producing companies whose names you'll likely recognize and who make sufficient profit to pay dividends to you as one of their shareholders. If you stick with it and ignore market gyrations, after a number of years you'll see improvements in your Dividend MF net worth.

I hope in the future you'll be less reluctant to make your money work for you. You could move some of your initial investment into other products with potential based on your understanding of market conditions. In 5 years interest rates may be sky high...[no crystal ball] you could transfer as much of your holdings as you wish to a laddered CD or ???