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Day 3 – Basics of Banking and Saving
By JLP | February 3, 2006
Welcome to Day 3 of 24 Days to Better Finances. Today we are going to discuss the basics of banking and saving.
In your budget, you should have some money set aside for emergencies. Most financial planners recommend having 3 – 6 months worth of living expenses set aside in some sort of savings account. Most people will use a bank or credit union for their savings account.
When looking for a bank, there are some things to consider:
1. What interest rates are they paying on their savings accounts? It is usually smart to shop around when looking for a place to stash your savings.
2. Find out if the bank offers special interest rates on other banking products if you have a savings account with them (more on this in a later post).
3. How many ATM machines does the bank have? This may or may not be important to you. However, you don’t want to have to pay those pesky ATM fees for using machines that are out of your network. The bigger the bank, the more likely they will have more ATMs. This might be important to you if you travel a lot.
4. What are the banks fees? My wife and I bank with Wells Fargo. We use their online service and have to pay $6.95 per month for bill pay. I know that we could get it for free elsewhere but it is a pain to change banks. It would have been smart to find out about these fees BEFORE we became customers.
5. How many locations does the bank have? This goes hand-in-hand with number 3. Do you think you might be moving to another state in the near future? It might be wise to see if there is a bank that is in both your current state and the new state you are moving to. That way, you don’t have to change banks.
One last thing. If you are looking for a place simply to stash your savings account or emergency fund, you might want to check out Emigrant Bank, ING Orange, or HSBC. All three offer really good interest rates on savings because they don’t have physical branches, therefore they keep expenses low. It might be something you want to consider.
So far, this particular topic has been the most popular among other bloggers based on the number of submissions I recieved. Here’s some links to what other bloggers are saying about this topic:
FiveCentNickel:
How to Create ING Direct Subaccounts
Make Direct Transfers out of ING
CanadianFinancialStuff:
FreeMoneyFinance:
10 New Years Money Resolutions
MusingMoney:
It’s Your Money:
CanadianCapitalist:
High Interest Savings Accounts
New High Interest Savings Account
BLOGGERS: If you have any posts that are related to this post that you would like me to include, please send me an email with the hyperlinks to your posts and I’ll be happy to add them in.
Topics: Basics, Financial Planning | 5 Comments »
February 3rd, 2006 at 11:55 am
I just applied for an money market account from GMAC bank, which is also an internet bank. How is GMAC compared to other online banks? Thanks.
BTW. Good series. I am looking forward to the following days.
February 3rd, 2006 at 12:20 pm
You can get the fees for Wells Fargo BillPay waived if you convert your account a to “Complete
Advantage” type rather than whatever the default is. It requires a minimum of $500 in checking and
$5000 in savings, but the interest rates are higher, checking earns interest, and the fee for BillPay
is waived.
February 3rd, 2006 at 4:15 pm
Weekly Roundup – 02/03/06
Here are some of the most interesting personal finance articles that I ran across over the past week or so
February 3rd, 2006 at 6:55 pm
Great series and I like this topic. I prefer bank accounts that will also leverage the rate of interest to the cost of withdrawal (i.e. the greater the withdrawal fee the greater the interest). It certainly makes you think twice before taking out some extra spending money.
September 8th, 2006 at 9:07 pm
Excellent post.
I opt for the internet bank option for my savings account.
One question, which no one seems to define, is a good definition of “emergency fund”. I agree with the concept, but if you don’t specifically state when and where to use this account, it either goes dormant (you completely forget its there) or it gets used for things that many would not call “emergencies”.
A time frame to build this up would be a good idea. How long should it take to put away 6 months worth of expenses?