Little number, big blowback
I was looking over my bank statements from Wachovia the other day when a peculiar number caught my eye.
$2.38.
Nothing so exciting about that? Exactly the point, my friend. For you see, that was the monthly interest payment my bank paid me on the not quite $10,000 in a money-market savings account. That works out to an appallingly tiny interest rate -- 0.35% per year, in fact. Per YEAR!
Of course, as my friendly neighborhood banker pointed out to me, if I simply kept a bit more money in the account, I'd earn a better rate. Sorta.
What's my reward for keeping a full $10,000 on semi-permanent loan to Wachovia? Try 1.98%.
Folks, according to the latest economic data, that's way behind inflation. And as ExxonMobil (NYSE:XOM), BP (NYSE:BP), and others in the oil game keep passing high oil prices along, sooner or later the consumer stalwarts we buy from, like Wal-Mart (NYSE:WMT), Lowe's (NYSE:LOW), and Starbucks (NASDAQ:SBUX), are going to have to pass those costs along to us in order to maintain profit margins and keep investors happy. That means it's more important than ever to find a decent place to stash our savings. We may not earn much money in inflation-adjusted terms, but at least we'll be less far behind.
The short-term catch-22
Why should I put up with a subpar payback on my emergency fund? After all, we're talking about real money. Here are a few numbers for reference.
|
Principal |
Rate |
5 Years |
10 Years | |
|---|---|---|---|---|
|
Wachovia Savings (Under $10,000) |
$9,600 |
0.35% |
$9,769 |
$9,941 |
|
Wachovia Savings ($10,000 or more) |
$10,000 |
1.98% |
$11,030 |
$12,166 |
|
Wachovia CD |
$10,000 |
2.96% |
$11,570 |
$13,387 |
|
Online Special 1 |
$10,000 |
4.00% |
$12,166 |
$14,802 |
|
Online Special 2 |
$10,000 |
5.00% |
$12,767 |
$16,289 |
What I'm looking for in an ideal short-term savings account is simple: low minimum balance, convenient two-way transfer between checking and savings, and an interest rate that at least matches the 5% or so I can get from a clunky online savings account. Is that so much to ask?
Apparently, yes.
Welcome to the jungle
Finding such a beast is no easy hunt. It's more like a traipse through the forest primeval, where you're snagged by vines, stung by insects the size of grapefruit, and maybe hauled off by a jungle cat, never to emerge again. Have you visited a bank website lately? The rates and conditions on linked checking and savings accounts are buried so deep and vary so wildly that it's nearly impossible to keep it all straight.
After a couple hours of searching, I was about ready to chuck the whole enterprise and stick with Wachovia. Then it occurred to me that someone else might already have done the homework for me: my colleagues at Motley Fool GreenLight.
The easy way out
I know, you're probably rolling your eyes. "Dude thinks the Fool's new service is good. Big surprise."
But it's true. Listen, I'm no great fan of reinventing the wheel, so why should I -- or you -- have to go out and do the research that advisors Dayana Yochim and Shannon Zimmerman have already done? Within a couple of seconds of landing on the home page of this new personal finance service (for the first time, actually), I came across GreenLight's recent article "Best Banks for Your Bucks."
I was quickly steered to a combo account offered by -- strangely enough -- one of the biggest names in the banking biz, Citigroup. It looks like it will suit my needs very well. In fact, the improved rate will probably earn me a few thousand dollars over the next few years.
The Foolish bottom line
In fact, GreenLight is all about the bottom line. The savings and investment tips you get every month in the newsletter (or every day on the companion website) come with a "money in the bank" figure. That's the amount you stand to earn or save by acting on these simple bits of personal finance maintenance.
And there's more than just bank deals. There are brokerage comparisons, investment tips, calculators, tax talk, message boards, user ratings, personal goal-setting tools, and more. Best of all, a free trial will fit any budget. If you'd like to see just how much more money you could put in the bank, click here for instant access to everything GreenLight offers.
Dayana Yochim and Shannon Zimmerman eat interest rates for breakfast. Seth Jayson prefers the Rice Chex. At the time of publication, he had no positions in any company mentioned here. View his stock holdings and Fool profile here. Wal-Mart is an Inside Value recommendation. Starbucks is a Stock Advisor pick. Fool rules are here.
