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How to Give Your Family Cover

In honor of Memorial Day, the Motley Fool salutes current and former military personnel and their families with a series of articles addressing common financial issues they face. Check out all of the Fool's Memorial Day articles.

For most of us, it's impossible to understand what life is like for a military family. Think of the sacrifices. From low pay to lengthy tours of duty to a barrage of reassignments, they endure it all.

And, of course, there's the ultimate sacrifice, which is too terrible for any of us to imagine.

Thankfully, I've never experienced that feeling, though my Dad is a veteran of the U.S. Navy. All of his brothers are, too. (To this day, you can visit the USS Clamagore, the submarine my uncle served on during the Korean War, at Patriots Point, South Carolina.)

There's little a writer like me, who spends his days hunting and pecking his way to an above-average living, can do for soldiers, sailors, airmen, and Marines who are risking their lives for the rest of us.

But as we approach Memorial Day, I feel compelled to try. Thus you have before you this column, a modest attempt to make preparing for the worst a little easier.

We call it an emergency fund -- you might call it a lifeline
My best advice is to create what we here call an emergency fund -- a stash of easily accessible cash that you can use to pay bills in the event of a disaster.

And I do mean cash. This site may be dedicated to investing in proven stocks like IBM (NYSE: IBM  ) , Coca-Cola (NYSE: KO  ) , and Disney (NYSE: DIS  ) , but investing is a sport won over the long haul. Selling stock to pay for an emergency can lead to subpar returns or even losses.

Then again, you may not have the cash to buy stocks. Military.com says an enlisted private in the U.S. Army on active duty from my area (near Denver, Colo.) can expect to take home just $1,301.40 a month. Try saving even a few dollars on that salary.

When even a quarter is enough
Yet there are other financial benefits to military service. One little-known perk is a maximum interest rate. According to the Pentagon Federal Credit Union Foundation, activated reservists aren't obligated to pay more than 6% interest on borrowings accumulated before they deploy. And that includes credit cards, mortgages, and personal loans, so long as your military income doesn't exceed your pre-deployment income.

Still, given my own personal tete-a-tete with credit -- I've been losing the war for years -- I can't recommend you rely solely on plastic to bail you out of a jam. Besides, you don't need to. Even if all you can spare is a dollar a day, there are accounts that will allow you to earn up to 6%, right now, on any amount you can save:

Bank

Yield

Notes

FBNO Direct

6.00%

Open account with at least $1. Promotional rate drops below 6% after Sept. 28. Prior rate was 5.25%.

Savings Square

5.10%

Open account with at least $1. Maximum of six withdrawals per month.

HSBC Direct

5.05%

Deposits can be completed at ATMs, by mail, and electronically. $50 bonus for an initial deposit of $3,000 or more. Expires May 31, 2007.

EmigrantDirect

5.05%

May link up to two checking accounts. Offers a 1.40% cash back MasterCard.

E*TRADE Bank

5.05%

$25 bonus available through May 31, 2007, with a $1 minimum deposit. (Wow.)

ING Direct

4.50%

Open account with $1 check. Automatic savings plan offered. $25 bonus available through refer-a-friend program, though a $250 minimum balance is required to qualify.

Sources: company websites and the Bank Deals blog

Of all these offers, I'm most intrigued by what E*TRADE Bank, which is a division of broker E*TRADE Financial (Nasdaq: ETFC  ) , is dangling. 5.05% with a $25 bonus on a $1 deposit? That's impressive.

It's also appropriate. No gift is too generous for the men and women of our armed forces, who are prepared to sacrifice everything in defense of their country. A Foolish salute to all of you. Come home soon.

For more money ideas, get 30 days of free access to Motley Fool Green Light right now. There's no obligation to subscribe.

Coca-Cola is an Inside Value pick, while Disney is a Stock Advisor selection.

Fool contributor Tim Beyers writes weekly about personal finance and investing basics. Have a Foolish money tip? Tell him. Tim owned shares of IBM at the time of publication. Tim's portfolio holdings can be found at his Fool profile. His thoughts on personal finance, Foolishness, and investing in general may be found in his blog. The Motley Fool's disclosure policy says Crimson Tide is its favorite sub movie and that U-571 is severely overrated.


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Tim Beyers
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Tim Beyers first began writing for the Fool in 2003. Today, he's an analyst for Motley Fool Rule Breakers and Motley Fool Supernova. At Fool.com, he covers disruptive ideas in technology and entertainment, though you'll most often find him writing and talking about the business of comics. Find him online at timbeyers.me or send email to tbeyers@fool.com. For more insights, follow Tim on Google+ and Twitter.

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