Almost enough to pay for Grad School

March 13, 2009 1:06 PM

I have saved up about $25,000 for school, which starts in September. I have it in a WaMu online savings account which had very high interest, but now the interest rates have plummeted so that I am barely making anything anymore. It went from getting $50 a month on $10,000 to making $17 this month on 25k. :( Where should I put my money where it will be safe, easily accessible in a fairly short term, and yet with as high of an interest return as possible. I also need to be able to continue to input money into the account every month when I get my paycheck. PS: I am planning to take loans if they are interest free and hold off paying them until I can't defer any longer. But when I quit my job, I will need to start withdrawing money for daily living expenses.
posted by brenton to work & money (21 comments total)

I'm sure I won't be alone in recommending ING.
posted by nitsuj at 1:10 PM on March 13

nitsuj is not alone. ING direct has great interest rates, and you can keep your money as liquid as you need it.
posted by buriednexttoyou at 1:18 PM on March 13

Cool, it looks like ING has a 1.65% savings account. That's higher than what I have now, thanks.

Would investing in a money market account be a good idea right now--the stocks can only go up, right? :-\
posted by brenton at 1:28 PM on March 13

Would investing in a money market account be a good idea right now--the stocks can only go up, right? :-\

Absolutely.
posted by phaedon at 1:29 PM on March 13

HSBC Direct has a competitor to ING... I use it.. it's at 1.85% as of the time of this posting...

One thing about HSBC's "documentation" (description of the savings account) is a bit confusing: It's not entirely clear that really, all normal transactions into/out of the account are FREE. They do a weird job of trying to be too clear that huge transfers to foreign banks may cost money -- and end up making you think that normal transactions in/out of the HSBC account cost money. They don't. I've never paid a dime in fees.

They're pretty comparable, really... (ING and HSBC's savings accounts)...

None of them are going to vary too wildly from each other - they're staying in line with what the market is doing. They'll have better interest rates when the market improves again.
posted by twiggy at 1:31 PM on March 13

Keep in mind that ING requires that you keep a checking account somewhere else. Beware of moving all your money to ING to get a "good" rate while reducing your linked account to the point where you're triggering new monthly fees.
posted by sageleaf at 1:34 PM on March 13

EmigrantDirect is another good one, currently paying 1.8%.
posted by jcmilton at 1:35 PM on March 13

Alliant Credit Union has a 3% rate right now -- and it's almost always higher than the competitors. Plus they also have high-interest checking! I love them.
posted by rabbitrabbit at 1:40 PM on March 13 [1 favorite]

bankrate.com lists savings account interest rates. Looks like the highest for a $25k minimum is like 2.65% GMAC is offering 2.5%.
posted by delmoi at 1:42 PM on March 13

I disagree somewhat with the remark above. Money market accounts broke the buck (meaning, were worth less than $1 for every $1 invested in them, which is sort of their schtick) for the first time ever only last fall, and things are pretty far from settled. Yeah, we had a decent week for a change, this week, but ... stocks have lots of actions other than going up, especially the way we are uncovering new Ponzi schemes every other day lately. If you're talking this September, that is a pretty short-term timeframe, which means risk is a higher consideration than it would be if you didn't need the money any time soon. I would personally stick with savings -- it's not glamorous (caution is mostly annoying, actually), and yeah, you'll be kicking yourself if we have a 180° turnaround and the Dow is back at 14000 in 3 months, but you shouldn't come out *behind*, which you might if you had had an MMDA last year. And, if you only earn 0.5% interest on it, you're still *avoiding* paying like 6% if you had to take a loan out for some equivalent amount. So IMHO, protect the principal from this volatility madness out here; any earnings are just gravy.
posted by sldownard at 1:47 PM on March 13

Try ShoreBank. It's a socially responsible bank (well, compared to other banks, at least) that mostly loans money to community and environmental organizations. The current interest rate for personal high-yield accounts is 2.80% APY. One dollar minimum deposit, free funds transfer, no fees, etc. Good luck searching, and good luck in grad school!
posted by Sfving at 1:50 PM on March 13

I'm not too impressed with the rates yet, but moneyaisle.com claims to "run an auction" to find the best rates for you (CD or Money Market).. I just ran a $25,000 savings account auction for California and it came out with 2.65%, which is no better than you can do yourself by visiting bankrate.com.
posted by mbatch at 1:54 PM on March 13

As delmoi said, checking the list bankrate.com is a good idea for a straight savings account.

The Bank Deals blog lists changes in available bank accounts, most (all?) of which are FDIC insured. A recent trend is high-interest checkings accounts, some of which have rates above 5%. The catch is that you have to jump through a lot of hoops every month to get that 5%, which usually includes things like making 12 signature transactions at merchants with the bank's debit card—which means making sure you sign for the transaction rather than typing in a PIN so that the bank gets more money from the transaction. If you don't get through all these hoops you get basically nothing. This aspect has scared me away, but if you are more organized and determined to get more money, you might want to try it.

I would avoid uninsured money market accounts. You may not be able to find a money market that pays as well as some of these reward checking promotions.
posted by grouse at 1:59 PM on March 13

what sldownward said. And note that money market accounts are about the credit market, not the stock market -- if you're in a money market account and stocks recover by 50%, you won't see a corresponding 50% bump in your savings. But your time horizon is too short for investing in stocks; stay safe in savings, and stay FDIC insured. (Credit unions are insured by NCUA which is essentially the same thing but for credit unions rather than banks.)

Re: the Emigrant Direct recommendation -- Emigrant also operate Dollar Savings Direct which is pretty much identical but with marginally better rates. (Used to be significantly better, but the gap has narrowed fast recently; the usual tactic with online banks is to launch high to attract business and then slide back into the pack.)
posted by We had a deal, Kyle at 2:22 PM on March 13

I use HSBC Direct as well. They've been great. The only downside is that doing ATA transfers (to go between one bank and another) can take up to a week before it all clears. As long as you can plan ahead, you'll be fine. Also, you may want to consider CD's for part of your money. Their interest isn't much higher, but across 25k, you'll probably see a difference.
posted by JuiceBoxHero at 3:36 PM on March 13

First Trade Union Bank is offering 3.20% APY for a minimum of $2500.
posted by TheRaven at 4:06 PM on March 13

I was using ING direct but switched to etrade banking because they were a full percentage higher about 6 months ago. I don't even pay attention to the rate anymore since it falls a quarter of a point every two weeks =\
posted by zephyr_words at 4:40 PM on March 13

I have a "high"-interest checking account like the kind that grouse mentions, at my local bank. Last month the rate was 4.01% (down from 6.50% when I opened it a year ago). I need to have one direct deposit and must use my debit card 15 times a month, but it doesn't matter if I sign or use my pin. I also get all my ATM fees rebated. You should look around in your area for this type of deal.
posted by Joleta at 10:36 PM on March 13

I'm making 3.5% at Selco, a credit union with offices in several cities in Oregon. If I can leave my money in for 11 months, I'll make an extra 1% over that. (I have the money from my home's sale, until the market settles and I can reinvest it in a home). Look at local credit unions. They are audited frequently, have stringent rules that favor "members" (account holders)...are very safe, and often offer unique and high-paying programs for savers who have a little more to invest. More people should belong to credit unions, imho, since they are locally owned and operated, not for profit, offer personal service and almost anyone can be a member.
posted by mumstheword at 11:00 PM on March 13

5/3 bank has some incredible (in relative terms) CD rates if you also open a checking account. (I got 4.4% on a 16-mo in November, I think they're at around 2.65% right now)
posted by nax at 5:54 PM on March 14

Have you considered parallel CDs? It's a great way to get the higher interest rate of a CD, while avoiding locking all your money up at once.
posted by pecanpies at 8:10 PM on March 15