A New Investment!
Posted on November 5, 2006 12 Comments
I’ve decided to open a CD online with ING Direct. (For those of you interested in learning what a CD is, check out my post, “CD’s: Not just for listening pleasure!“) The current rate is 5.10 percent for a 12-month investment.
I’ve taken the first step of transferring funds from my savings account to my checking account, and tomorrow I’ll open the ING account. (Almost made the mistake of opening an ING account without putting money in my checking this morning! Duh!)
With this investment, I’m opening up another tier of savings for myself. I’m splitting my short-term savings into two vehicles: an easily accessible “rainy day” fund, and a higher-earning short-term savings fund.
Earth-shattering it’s not, but you all know my philosophy into the world of savings and investments is built on baby steps. It hasn’t steered me wrong yet. Besides, I’m still slightly skittish about locking up a pool of money for 12 months. That said, I know that realistically I won’t be making a downpayment within that time frame, so I should just do it!
Here’s a review of the ways in which I’m building my assets:
- WaMu savings account for rainy day fund
- ING Direct 12-month CD for short-term savings goals (downpayment on a house/condo)
- 401k for long-term savings goals (retirement)
I think this is a step in the right direction. For me, personally, it’s better to build a stable foundation than to make uneducated moves into stocks/bonds. I know plenty of people who refer to jump right in for the biggest gains, but I personally have always been more of a “toe-dipper” than a high-diver.
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12 Responses to “A New Investment!”
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November 5th, 2006 @ 8:26 pm
You are so right!
P.S. Do you eat sheep?
http://eatsheepeat.blogspot.com/
November 5th, 2006 @ 8:46 pm
You’ll have to keep us updated on how you feel about the ING CD because I want to do it, but have hesitated actually following through. This may be the push I need to open my own CD!!
November 5th, 2006 @ 10:08 pm
I think CDs are nice and safe. However, I never felt they were for me. I dont like the lack of liquidity. And the rates really arent that much better than online savings accounts. I like Prosper.com and the stock market more. However, the liquidity that both offer is replaced by a huge amount of risk.
I would probably also choose 28 day t-bills before CDs.
November 5th, 2006 @ 11:51 pm
If you already have an existing brokerage account, I would look for brokerage money market funds as well, you can typically see rates very close to what a CD offers, yet there is no liquidity issues. Also, in a rising interest rate environment, your rate goes up as well rather than being locked in. (Although in a declining rate environment, that is not a good thing).
I outlined them a little bit more and featured some examples on my site here: http://genxfinance.com/2006/10/21/brokerage-money-market-funds-a-great-cash-option/
November 6th, 2006 @ 12:03 am
Actually, before you do this, I recommend you check out EmigrantDirect (www.EmigrantDirect.com). They are currently offering 5.05% APY in their savings account (not CD) so it’s totally liquid. They also offer a CD which is currently 5.20%, though I think you still can do better with CDs. (Try World Savings for example at http://www.WorldSavings.com).
I like EmigrantDirect. Like INGDirect, there are no fees or minimums, all FDIC insured, but EmigrantDirect has consistently higher rates. I think ING spends too much on advertising which cuts into the rates they give you. I’ve seen EmigrantDirect recommended by Suze Orman and also heard that they gave all their customers in Katrina affected regions $1000 in their accounts to help out.
November 6th, 2006 @ 12:38 am
Oh, I probably should add that you should consider putting your rainy day money into a high yield savings account (like the aforementioned EmigrantDirect). I suspect the WaMu interest rate you will get will be low and inflation will eat away at all your money.
November 6th, 2006 @ 1:08 am
I think baby steps are great steps and you’re absolutely right about building a stable foundation. I took the same approach and I’m in a blessed place right now.
I would like to suggest you add us savings bonds, I bonds to be specific. i’ve never tried any of the other treasuries except the bonds because the are easy for me to understand. i like the fact that you can invest as little as $25 dollars, which is where i started some years ago. I love the fact that they are exempt from tax until you cash them in and you can cash them in with no penalty after only 12 months.
Each bond you purchase is listed with the date of purchase and the interest that, that paticular bond has made. and if you need to cash in all or just a few bonds you can hit redeem and the money will show up in your bank account. It has grown to be a significant part of my financial foundation. I treat the Ibond account like the 401K that i can touch without any penalty if I need to.
Good luck with building that foundation.
-Omnitre
November 6th, 2006 @ 3:59 am
Hi,
I think its great that youre going to set up a CD! (im also a big fan of your blog). Just wanted to point out that you can get a 6-month CD at Citibank for 5.25 at the link below.. Its a better deal than ING, and as the comment above mentioned, EmigrantDirect (which i use personally and can voich for) offers a 5.05% high yield savings account thats totally liquid and has like a $100 minimum. You shoudl probably go for that instead of locking up your money at ING for only 0.05% more, unless locking up the money is the point.
thanks for posting, love your blog!
https://web.da-us.citibank.com/cgi-bin/citifi/scripts/prod_and_service/prod_serv_detail.jsp?BS_Id=SvgCDs&BV_UseBVCookie=yes
November 6th, 2006 @ 5:19 pm
We love love love Orange. The rates are great and it’s very easy to use to transfer money between accounts. Hooray for you!
My husband has us doing a cd ladder so when one expires we buy another one. Of course, you only want to do that when your reserves permit. Good luck
November 6th, 2006 @ 6:17 pm
The great thing with ING CD’s is that if you do need to pull the money, the only penalty is half the interest you’ve earned to that point. Another reason to love ING
November 7th, 2006 @ 1:09 am
HSBC are paying more than that on an online savings account. Or maybe you want to lock the money up so you won’t spend it?
November 7th, 2006 @ 7:00 am
I just put $5k in a Citibank CD. a 6month CD is paying 5.5%, that seems a lot better than 12 months at 5%