What do I do with a big check?

January 7, 2008 11:44 PM

I'm about to receive $40,000. How do I deal with this much money?

I'm about to get $40,000 as part of a divorce settlement from the sale of real estate (frankly, I'd rather have stayed married but that is not to be.) Can I just deposit it in my savings account or do I need to do something special? I may need to spend most or all of it in the near future: while I have it is there something very safe I can put it and "earn" interest while still being able to take it out?

posted by anonymous to work & money (19 comments total)

My condolences on your divorce. Many banks (online and otherwise), offer money market accounts which are currently earning between 4-5% and are considered very safe investments. These accounts are easily linked to your main checking account (even if it's with another bank) and offer multiple free transfers per month. You might check out this link for a list of high yielders. I can personally recommend GMAC Bank, which is no frills, easy to use and can be set-up online with no paperwork.
posted by lumosh at 12:13 AM on January 8

I can recommend FNBO Direct. Their APY is currently 5.05%.
posted by kindall at 12:17 AM on January 8

Dave Ramsey has a good financial podcast and his books and site are useful. He's answered this question a few hundred times on his show. He'd just have you park the money in a savings account or a money market account. He always sys this to anyone going through a divorce or who has suffered a death (life insurance money). Take the time to get your head straight and don't make bad decisions out of grief.

He's the have you do this. Baby Steps.

I like the show. Your opinion may differ.
posted by cjorgensen at 12:25 AM on January 8

ING Direct has a pretty good interest rate as well. It's a solely online bank. Have had money in there for awhile now.
posted by Defenestrator at 2:36 AM on January 8

BankRate's listing of highest-interest $25,000 savings accounts. It's no surprise that troubled Countrywide is at the top of the list. Although if your money is in an FDIC-insured account, you are still relatively safe.
posted by grouse at 3:15 AM on January 8

Seconding Defenestrator, I opened an ING Direct account when I came into some money and it's served me well over the past few years. Being online-only (yet tied to your regular banking account) means it's relatively easy to get to but not TOO easy to get to, if you know what I mean. If you're worried you might spend it on something frivolous, that's a happy medium to have, all while earning some nice interest.
posted by bitter-girl.com at 5:56 AM on January 8

ING Direct probably works well enough for this sort of thing. They have good interest rates for their savings accounts, and your money is safe. I think depositing and withdrawing money from the account takes a few days. The saving accounts are tied to one of your chequing accounts, and you move money back and forth that way.
posted by chunking express at 6:37 AM on January 8

Just take note that when you deposit the check the bank will likely put a hold on some or all of the money until it clears. This time can range from a day or two to a few weeks depending on your bank.

The hold time will likely be significantly reduced or eliminated by using a bank/cashiers check, or better yet a wire transfer. The $5-$50 this could cost will more than be made up by the interest gained from not waiting 10+ business days for your money.

And many of the online banks will give you a better interest rate than a brick and mortar. Find one that suits you (but I can also recommend ING, interest rate is currently 4.1% annually).
posted by langeNU at 6:42 AM on January 8

2nd on the langeNU comment.

As an individual, don't actually take possession of the funds. Have the banks involved
perform a fund transfer. As I recall, if 'you' touch the funds, then there are a number of
reporting issues that must be satisfied (DOJ/DEA to name one). I think anything over
$9999 requires 'Cash Transaction' reporting.

YMMV
posted by sandpine at 8:35 AM on January 8

sandpine, that's not true as long as it's not actually cash. I can't imagine that money from a divorce settlement would be in cash.
posted by iknowizbirfmark at 9:40 AM on January 8

How do I deal with this much money?

You party like a rockstar.

Either that, or you invest it in something like ING direct or HBSC online, which earn you around 5% interest and allow you to withdraw your cash anytime.

You know, whichever sounds like more fun to you.
posted by chrisamiller at 10:07 AM on January 8

Don't forget about taxes! Make sure you've consulted with a tax lawyer or accountant who can explain how much of the money you're likely to actually receive. Then go for a high-yield savings account and/or cd ladder.
posted by equipoise at 10:25 AM on January 8

ING is more like 4% these days, for what it's worth, but they're just fine apart from that (and having to mail your paper checks in for deposit).
posted by kcm at 10:37 AM on January 8

Emigrant Direct is an online bank much like ING and has about the same interest rate for savings account. The advantage to using one of those over a money market account is you don't have to keep your money in for any set length of time. Transfers take a few days (and I'm assuming transfers of large sums can take much longer). I've been using them for about a year now and have had no issues.
posted by J-Garr at 11:34 AM on January 8

People are probably going to hate me for saying this, but I'd put mine in a PayPal money market fund. I know people have had problems, but the return rate right now is just over 5 percent. It doesn't cost anything to transfer to or from your bank account.

Please don't party on it. I gave my ex-husband $23,000 and he spent it on stupid custom clothing, shoes, speed, women, alcohol and a new car down payment. He ran through all of it in about 2 months, so that when the IRS came a-knocking this year saying we owed back taxes due to an error, I'm having to foot the bill totally alone. He's even had the nerve to come back and ask me for more money... I'm sure you're not that kind of a person, but blowing "free" money is like shooting yourself in the foot. Invest it.

Wait until a couple of years have passed before you can safely say that all fallout from the marriage is done; you might need the money for a lawyer, accountant, tax burden or sudden illness/unemployment. If it was a million dollars, sure, blow some. This isn't enough to do that.

(waits for comments about PayPal being horrible, but seriously, that is my suggestion)
posted by Unicorn on the cob at 1:38 PM on January 8

One thing you shouldn't do is put your money in an account that is not FDIC-insured if it earns less than an available FDIC-insured account. So from that perspective, the PayPal money market is a bad idea.

Then there's also the whole PayPal arbitrarily freezing or taking your money thing which is another big minus.
posted by grouse at 1:54 PM on January 8

Seconding what equipoise says about taxes and professional advice - I found when I divorced that some laws about settlements, taxes, etc were a bit counterintuitive.

Also, best of luck to you in this new chapter of your life (even if it wasn't what you would have chosen).
posted by pointystick at 2:10 PM on January 8

Look into a Vanguard Prime Money Market fund - seriously. You'll make better interest, and money market funds don't have the same volatility you'd find in the stock market.

It made 5.14% last year and you can write checks on it, just like a savings account.
posted by MythMaker at 5:58 PM on January 8

Vanguard Prime Money Market fund

Also uninsured with a lower yield than some FDIC-insured savings accounts.
posted by grouse at 6:16 PM on January 8