Christian Finance

Dollars in your wallet - Part 3: One Year High Yield CD

Today's savings tip to put more into your wallet - believe it or not, it focusses on the vanilla bank certificate of deposit, otherwise known as a CD.

If you have a need for money in about a year from now - say for a major purchase such as a downpayment on a home, new vehicle, or college tuition - then you can safely lock up your money for a year and earn a higher rate of interest than if you had just parked the funds into a money market or savings account.

A great 1 year CD is at Ally Bank, where - as of today - they are offering an guaranteed CD yield of 2.05%.  Add to that the fact that there is no minimum deposit, and we have another Christian Finance dollars in your wallet winner!

In case you're wondering, Ally Bank is now what used to be GMAC - the financing arm of General Motors.  And no - you don't have to worry about the safety of your money - it is FDIC insured up to $250,000.

Dollars in your wallet - Part 1: High Rate Savings Account

I've been battling quite the cold over the past week and it had really slowed me down. However, I am finally on the mend and am working back to my full schedule of activities.

In today's news, American Express has recently introduced an online savings account, similar to those offered by ING, FNBO and Ally Bank. With strong brand recognition and the backing of FDIC insurance, American Express is making a strong entry into the competitive world of online banking. With a new savings account paying 1.85% and no fees or minimum balance, this account makes you the winner!

Check it out here.  Happy saving everybody!

How Safe is your Bank?

I have repeatedly mentioned the need to save some of your income every payday to build up your reserve fund and have a bit of a cushion in case of job loss or some other unforseen event.  

Great you say - I want to save, but with the turmoil in the banking industry right now, how do I know that my bank is safe?  Well, if your bank is FDIC insured and you have less than the insurable amount of $250,000 on deposit with that bank, then your funds are safe.  If that is not enough for you, then there is an interesting website that can help you check the safety of your bank.

It is called Banktracker, and is located here.  You can perform a search of your bank by state or by name. The result will come bank showing how your bank compares to national averages with regards to 'troubled assets'.  It can provide an interesting perspective of your bank and its perceived safety.

Do not panic if your bank is slightly over the national median.  One of the most solid banks currently in existence - JP Morgan Chase - has a ratio that is above the median.  All this site provides is just one statistic that provides an interesting perspective - that is all.  Do not read more into it than that!

Of course if you find that the 'troubled asset ratio' is excessively high, then contact your bank and talk to them about it.  See what steps they are taking to resolve the difficulties that they may be in.  And then - if you are not satisfied with the responses or still feel unsure - find yourself a new bank.

Thoughts on Savings Accounts

I have been focussed rather heavily on the markets this past week - so today I am going to talk about another facet of financial life.

I’m sure that you have all heard the advice that one should have 3 - 6 months of cash on hand as an ‘emergency fund’.  Phew - that much?  I know for myself, along with most people, having 6 months worth of expenses tied up in a savings account is quite a stretch.  Having said that, it is likely that you do have some savings (if you don’t why not?) and you may be in a position that you are adding to it periodically.

If that is the case, then you should take a look at where you are saving your money. With interest rates at historic lows right now, keeping your money in the wrong account can cost you hundreds of dollars every year!

As a comparison, let me outline the savings account rates on the following banks - both of which I use:

Washington Mutual (soon to be Chase) Statement Savings Account: 0.01%

FNBO Direct Online Savings Account: 2.15%  

If you have $5,000 of savings, you would earn:

WaMu: $0.50 per year

FNBO: $107.50 per year

That’s quite a difference!  In general, I find that ‘brick and mortar’ type banks are fine for checking accounts (I love my WaMu free checking), but online banks tend to be much better for actually saving your money.

In addition, online savings accounts are very easy to set-up and they are FDIC insured, so you do not have to worry about the safety of your money.  Most importantly, it takes a day or two for an electronic transfer to take place between your online savings account and your checking account, thus avoiding the temptation to withdraw your savings too easily while at standing at an ATM.

Think about this whether you have an emergency fund put together already, or if you are just starting one up.  It is the prudent thing to do, and demonstrates good stewardship of the resources that God has blessed you with.