High Yield Checking Account Interest Rates Hold Up Better Than Savings

High yield savings account interest rates took a hit again this week (Feb 16) with a majority of the major players again reducing returns. However, high yield checking account returns have held up better. Bankdeals.blogspot.com reports this week that there are still plenty of good returns to be found with high yield checking accounts. Below is a list of places that you can still get a good deal from Bankdeals. The site also has a ton of information about the highest CD, savings, credit union yields, and bank account bonuses for the rate chasers out there.

• 6.01% Reward Checking at Air Academy FCU
• 6.01% Reward Checking Account at Charter Bank
• 5.51% Reward Checking Account at Provident Credit Union
• 5.09% Reward Checking Account at Consumers Credit Union
• 5.01% Reward Checking Account at State Bank of Toledo
• 5.01% Reward Checking Account at Connexus Credit Union
• 4.44% Reward Checking at First Arkansas Bank & Trust
• 4.00% Reward Checking Account at First National Bank

PS: Before you jump to a new account for what could be a teaser rate it's a good idea to crunch the numbers with a rate chaser calculator to see how long it will take for that new rate to pay off.

What Will You Do With Your Stimulus Check?

Now that it is looking more and more likely that Pres. Bush's economic stimulus package will in fact be made a reality as early as next month -- raining down checks of $300 to $1,200 per household.. What do you plan on doing with your check? I plan on investing the money (I suppose that shouldn't come as a surprise since I blog about being cheap). Sorry to those of you expecting me to do my part to get this economy back on track - hopefully other people carry my weight for me.

I'm curious to hear from other people what they plan to do with their refund. Of course, if this plan is going ot work people need to spend the money and the sooner the better. It has been reported that it takes at least six months for the spending to stimulate the economy.

Economists are notoriously poor at predicting and modeling what will happen with the economy, so what is your guess? After all, you have a better chance of being right than the weather man.


Read more about the plan @ NYT

Image: dcjohn @ Flickr

Study: Want to be rich? Be Moderately Happy

We’ve all hear that the rich are unsurprisingly more happy on the whole than typical common folk, but there is a new study that says when it comes to financial success, it’s better to be only slightly more happy than average.

Turns out that after researchers at U. Virginia, U. Illinois, and Michigan State analyzed data and published findings in Perspectives on Psychological Science. The conclusion was that people who rank themselves a 7 or 8 on a scale of 10 achieve more success than people who rate themselves a 10.

So, does this mean that someone like Richard Simmons who is an eternally perky 11 on 10-point scale would do better if he turned it down a notch? Not sure, it’s difficult to accurately quantify happiness since happiness is a subjective beast.

The study posits that people who score off the charts for happiness tend to look at the world through rose colored glasses and as such don’t learn from mistakes – making them less productive than people who are less happy.

I will throw my completely unscientific theory out there… I think that people who are really happy are less successful because they are in a word content. People who are completely content in my opinion generally have less drive – and maybe lack the Type A high achiever personality found in many people who find above average financially success. People who are super happy might fall into either people who are content with meeting an average level of success and comfortable lifestyle – or they may be entrepreneurs who continue to keep on going regardless of what life may throw at them taking bigger risks for bigger rewards. Just my two cents.

Link @ Yahoo Finance

Image: Itzafineday @ Flickr

Charitable Checking Accounts

There is a trend towards people setting up charitable checking accounts in lieu of a charitable foundation to give away money.

The accounts administered by companies like Fidelity and Schwab allow investors it contribute assets and determine when and where to make distributions. Fidelity lowered the minimum investment to open an account to $5,000 - but many are in the $10,000 range, so they are now within reach for the average investor. If you contribute to a small handful of 501(c)(3) organizations the donor-advised checking accounts can offer lower fees and the money in the fund can grow tax free until distributions are made. The fees are generally in the 1% range and you can take a tax discount on contribution to the account the year they are made. Then again you could make the contribution outright and not pay Fidelity 1% to hold it in a special account.

For people looking to stroke their own egos, it's possible to name your CCA something like the "John Smith Charitable Foundation" and make it seem like you have a charitable foundation set up for yourself without the legal costs and paper work.

Read the whole article at about Charitable Checking Accounts at YahooFinance or read the better article on Starting a Charitable Checking Account at MSN.

2007-2008 IRA Contribution Limits

Although you have until April to get your retirement contributions figured out, below are the limits for this tax year (2007) and 2008 for those of you thinking ahead. For 2007, individuals under 50 can contribute up to $4,000. This number rises to $5,000 for 2008. If you are over the age of 50 you can make "catch-up" contributions and contribute $5,000 in 2007 and $6,000 in 2008.

It should be noted that these limits apply to individual contributions to Roth IRA's, traditional IRA's and to SEP plans.

Study: U.S. 401(k) Savings Rates Up

Fidelity just released a study that says the median 401(k) balance rose 30% this year. While some of gain is likely attributable to the rather robust (if not chaotic stock market this year, the other 20% or so is a result of people socking more money away. I'm not trying to knock the results here, because any time people take a second look at their investments and put a little more money away for later rather than spending it on a Jamaican vacation I approve. BUT, when you look at the figures cited in the study they are pretty abysmal. Below are the average 401(k) balances for different groups.

• Baby Boomers rose 7 percent to $38,000
• Gen Xers rose 10 percent to $15,000
• Gen Yers rose 21 percent to $2,100

Now here are the average contribution rates.

• Baby Boomers 7.7 percent
• Gen Xers 6.2 percent
  
• Gen Yers 4.6 percent

Hopefully what the statistics don't show is that there is quite a bit of other money that is being invested elsewhere outside the 401(k) plans in vehicles like Roth, or traditional IRA accounts... unfortunately I would guess there is not.

Related Article:
401(k) Flubs 5 to avoid @ CNN

Buying a House? Here's a Way to Save a Fistfull of Cash

Hot on the heels of Iggy's House (previous post Iggy's House) trying to shake up the real estate market on the seller's side, it's sister company BuySide Realty is trying to mix it up on the buyer's side. It's a pretty radical approach and something that I can guarantee will be fought tooth and nail by brokers everywhere.

Here's how it works. John is selling his house, he hires an agent, Bob, to show his house to people, list it on the MLS and negotiate. John's paying the broker a commission of probably around 5 or 6% for his services. What a lot of people don't know is that commission gets cut in half if another agent comes along representing a seller in the transaction. No so good for Bob, but John doesn't care because his house is getting sold at the same price and the more people out there looking for buyers the better. This buyer's agent commission fee is the reason why real estate agents love for you to sign that form that says they are representing you looking for a home.

BuySide Realty (and I'm sure as I write this other people are drawing up similar business plans), lets you keep the majority of the buyer's agent commission fee, 75% to be exact. Let's do a hypothetical. Say you are in the market for John's home which is selling for $250,000 and he is paying his broker a 5% commission. The total commission John pays is $12,500 and Bob will keep that if you aren't represented by an agent yourself. If you were represented, your agent would get around $6,250 for their services. If you do a little more legwork and find the home yourself then you can keep 75% of the buy side commission or $4,687.50. I don't know about you, but sounds good to me.

I know that I will get at least a few emails about the indispensable services that real estate agents provide and how buyers using the service will be left unprotected. I don't dispute the fact that agents offer valuable services, but the market has changed. I think the service and others like it are valuable because 1) there is a lot of market research out there now even if imperfect like Zillow (previous post Zillow) 2) real estate agents can't warrant the habitability of homes or conduct inspections for the buyer 3) the buyer is doing the leg work finding properties 4) BuySide provides an agent for the process even if the agent provides reduced services.

Link

BuySide Realty
Image: Creative Commons Karen Apricot

Should Spouses Combine Finances?

I think I have posted before that I'm getting married soon. Since read recently that money is the number one conflict in most marriages. In preparation for my wedding I have been reading up on whether spouses should combine their finances.

My fiancee and I have similar spending habits and stay on the same page about most things, so I assume we will end up combining things to keep everything consistent and easier. It looks like it is getting more common for couples to keep everything or most everything separate. According to MSNBC, about 1/3 of women now have a brokerage account of their own separate from their husbands.

I've compiled a list of pros and cons that I think my fiancee and I should consider when talking it over.

Pros:

• All about the "we": Of course this can also cause fights in a relationship, but staying on the same page and working toward the same financial goals can be rewarding. Even if there are occasional bumps. If you're working together the finger pointing can be kept to a minimum.
  

• It's easier: As a matter of efficiency, I think it is easier to combine your accounts. There should be at least a few things that become more efficient when you get married. You only rent one place instead of two, can sometimes get away with one car, and I don't want to deal with two brokers who don't think I have enough invested with them to take time out of their day to manage my investments.
  
  
• Consolidate for better returns: If you combine your funds into a few accounts you might be able to reduce fees by having higher balances, get better returns, have better service from your broker. Some brokers have accounts with $2,500 or $3,000 balances which can be met sooner if you combine funds. There are also a lot of companies that have sliding scales that have rates that are higher as balances increase.

Cons:

• Probate Problems: If your spouse dies (depending on what state/jurisdiction you live in) any accounts may be frozen in their name. It's really important that you have some money in your name to pay a month or two of expenses if tragedy strikes. Probate is a painfully slow procedure. A good attorney can minimize problems, but it won't be immediate more than likely.
  

• You Credit History: When one partner handles all the financial issues things can go smoothly, but then again if you ever separate or your partner dies - you won't have much of a credit history. If you do combine finances you should at the least keep a credit card or two in your name to keep your credit healthy.
  
  
• A Jealously Issue: Some people look at keeping finances separate as a lack of trust. While this can be the case for people who think their spouse is a poor money manager, it isn't always the case.
  
  

Whatever you decide talk things through. What works for other people doesn't for others. The Simple Dollar has tips for talking to your spouse about combining finances. Another possible solution would be to direct deposit the vast majority of your paycheck into a joint account with a small fraction to a separate personal account for each spouse. This way you stay on the same page, but each have some freedom to save, invest or spend your share as you please.

Links
Separate Accounts Save Love Life @ Guardian Unlimited
The Color of Money (realplayer) @ NPR
Marriage till Debt Do Us Part @ USAToday
Q&A Couple Finance @ LongRelationships

Teaching Your Kids About Money By NOT Giving Them Allowance

I don't have kids, but recently read a conversation over at No Limit Ladies, between an entrepreneur and the blogger who runs the site, regarding whether it is good or bad to give your kids an allowance. It got me thinking about where I stand on the issue. For those of you who haven't had a chance to read the article it brings up some good points, but the gist of the article is that it is better to teach your how to sell items and earn money than give them handouts.

I generally agree with the entrepreneur's point of view on the site, but maybe not to the extreme he does. I really value entrepreneurship, people who work hard, and don't want my kids sitting around looking for handouts. But, I'm not sure I want them pawning their toys to buy the newest Nintendo Wii game.

I think my take on the issue is I think that kids shouldn't get an allowance by default. My view is that kids should learn to pull their own weight and have certain set duties as well as other things that they may be asked to help with. If they want to make some extra money to go out to the movies or buy some new clothes they can ask me to help out around the house with other chores which each have an assigned dollar value. I think that is the easiest way to show kids the direct correlation between work and purchasing things. I might not each them how they have to hustle to sell things and how difficult it is to start a business - but it will teach them the value of money and how hard savings can be.

I'm also a big fan of matching money that kids invest. I don't know how well it works since I don't know anyone who personally does it with their kids, but it seems like a way to encourage savings if nothing else.

Link
No Limit Ladies - Why I don't give my kids allowance

Online Personal Finance Calculators

I've said this before, I love the wide variety of online personal finance calculators there are out there to save us everyday folk time. They save people like you and me from breaking out something like this...
Here are three more to add to the list of handy time savers. This group covers the value of your college education, taxation of bonuses and whether you should exercise stock options.

How much is your graduate education worth? This calculator takes what you expect to make before, after, years till retirement and the cost of your education into account. I personally like it because it shows you the break even point to where your education has paid for itself.

What will my bonus net after taxes? This calculator is pretty straightforward, it takes your bonus amount, income, deductions and allowances to determine how much you will get and how much Uncle Sam keeps for himself.

Should I exercise "in the money" options? With obvious shortcomings - since there is no way for the calculator to know if your company is in a downward spiral - this calculator will attempt to give you a good idea about whether or not you should exercise those options floating around in your portfolio (if you are fortunate enough to have some).

DRIPs a Good Idea for College Students?

When you think of the things you might have purchased or do purchase as a college student beer, music (unlikely), food, and housing probably come to mind. Safe to say DRIPs don't come to mind for many people, if they know what one is at all (a dividend reinvestment program which generally allows fractional share ownership).

How about DRIPs as a smart investment for college students? I don't know about you when you were in college, but I didn't have expendable income to be throwing around investing. Look at the staggering average amount of student loan debt people come out of undergrad with these days or the costs or any professional school. If you can afford that kind of tuition and still have money in the bank then maybe this is a good idea for you.

I remain unconvinced that this is a practical solution, mostly because the article suggests that you start with $200, then make payments of around $50 a month. For the average college kid - who isn't still living off mom & dad's credit cards if we can clarify here - $50 a month is a good chunk of change. True it might only be the equivalent to a cable payment or cell phone bill, but if you are making minimum wage and not working full-time substantial none the less. Let me know what you think.

Wikipedia - DRIPs

Source article at Forbes

5 Ways to Find Cheap Gas

Do you like getting screwed on the regular by OPEC & Co.? Yeah, I don't either and I'm not that guy who drives a Hummer and then complains about how awful gas prices are. Well I'm here to help. Here are five ways you can find the cheapest gas around without putting in much time or effort.

1) Install Widgets:

like "GasWatch" for PC

and "Gas" for the Mac

2) Visit websites that will let you search by zip for gas prices and view locations on a google maps type interface.

like GasPriceWatch.com

3) Text messaging: If you are handy with a cell phone you can text the guys over at 411sync with your 5 digit zip code and you will get a listing back of prices in your area.

4) Mobile web: Another one for those of you with a capable cell phone. If your cell phone, blackberry, or PDA surfs then head over to www.gasbuddytogo.com

5) GPS system: StreetPilot and a few of the other new in-car GPS units will offer this information to you directly. If you can afford a GPS system you probably don't care if you save 3 cents on a gallon of petro, but if you do the option is there.

Full Story Here

How to Size up A Broker

One of the many great things that the Internet has done is move the power from industry specialists to the average person (assuming they are willing to fire up google and put in some time). Now I'm not implying the internet will allow a person to become a specialist at anything, but it cuts down the risk that they will be taken advantage of when buying a car, home, or other big ticket item.

Fool.com has a list of questions to ask when interviewing financial planners. The questions fall into three categories 1) costs, 2) products, 3) service. Planners are all over the board when it comes to fees. Trading fees, minimums, and other fees all must be considered. You should take into account the portfolio of services your broker offers, research, and the different ways you can make trades. Finally will the broker give you the time you deserve. Some brokers will not give small investors the attention deserve because the commissions are much smaller. Then again, just because the planner will answer your call on the second ring doesn't mean he is any better at putting your money to work for you. Find someone you are comfortable with and that you are willing and able to move from if your money stops performing as it should.

Full article here

Choosing an Online Broker

The Motley Fool has a decent article describing the best places to invest if you have an extra $20, $100, or $1,000 lying around. I think the article is good because it gets people thinking about investing incrementally. It's easy to invest if you already have gobs of money in your pocket. It's much harder when you are starting with a pair of Hamiltons in your wallet.

The article operates under the assumption you have paid off all your high interest debt from credit cards and other not-so-favorable investments.

• If you have $20: The Fool says to consider investing in a DRP (a plan some large companies have allowing employees to purchase stock). That is good advice, but for those of us not working at a fortune 1000 company where else could that $20 be put to work? Regular visitors to the site know I'm a big fan of high yield online savings accounts. They won't make you rich, but are flexible, a good value, and generally have no minimums.
  
  
• If you have $100: The Fool says to consider investing in an index fund. The rub on this type of investment is that you may have that investment chewed up by broker fees. If you get charged $10 to buy the fund, then another $10 a year until your account meets the brokerage minimum, you will have to make more than 11% per year (on the $90 invested after commission) just to stay even. Again I think $100 is better spent in a high yield savings unless you already have a brokerage account up and running. In that case the index fund can start to make more sense.
  
  
• If you have $1,000: Here you have more options. The Fool says a good option is a discount brokerage account charging less in commission than 2% of portfolio value. I think another excellent option is a Roth IRA account. There are plenty of fund families that are no load and if you couple that Roth investment with additional funds each year until retirement you will have a nice little next egg when you turn 65.

Check out the article here for the full scoop

A calculator for this, a calculator for that

If you haven't noticed I like online calculators because 1) they do a lot of the work for me and 2) they are less prone to mistyped figures and generally take a greater number of factors into consideration than I can without creating an Excel spreadsheet.

With that said there are three more calculators that I think people may find useful. Both are from Bankrate.com which really has a ton of useful stuff if you can wade through it all. The first calculator crunches the numbers on what price house you can afford. The second calculator will help you figure out how much you have to sock away (and let you change the interest rate) to reach a designated savings goal (FYI: $22 a day invested in a 5% savings account like HSBC will net you a cool million 40 years from now).

The third calculator for those of you in the market for a home or wondering if it is worth it will help you decide based on the mortgage price you are interested in, your current rent payment, and your down payment when a house payment becomes more attractive than your current rent. It breaks down the payments and closing costs (with rough estimates) and shows you where the tipping point is between renting vs buying. Head over the youngmoney.com to check it out.

The Rule of 72

For those of you who like to calculate compound interest in your head here is an article that discusses and will calculate the famed Rule of 72.

The Rule of 72 helps determine roughly how many years it will take an investment to double in value at a certain interest rate. For example a investment paying a 10% annual return will double in a little over 7 years (72 / 10 = 7.2). Those of you more mathematically inclined can crunch the numbers in your head but this calculator gives you the real answer as well (7.27). If you are really excited about the Rule of 72, the site also has an article explaining why the equation works... be warned the why section gives a very technical explanation and made my head hurt personally.

CD Rates

The one year CD rate is holding right around 4.86% (not a great deal since many online savings accounts are offering rates of 4.5% to 6.0% APY, but tonight I saw a few companies advertising rates significantly higher than that (especially if you have a sizable amount to invest which rules me out). AmTrust is offering a 5.46% APY $1000 minimum CD, NetBank is offering a 5.45% APY $1000 minimum CD both are FDIC insured.

EDIT: I have removed the entry here about Millennium Bank. I missed that it was not FDIC insured and apologize to everyone. Never a good idea to put money in a "safe investment" like a savings account or certificate of deposit that is not FDIC insured. It has been suggested that money-rates.com is a good place to find other FDIC insured investments.

Online Banking Showdown

What is an Online Bank?
The premise is simple, but frightening for some. A banking institution which in most cases does not have a traditional brick and mortar branch. The bank has lower overhead costs since there are no branches. In theory the bank can pass these savings on to you in the form of higher rates of return.

How Does it Work?
Generally an individual will begin by open a free checking account at a brick and mortar bank that has many nationwide locations (Chase, Bank of America, WaMu etc. - or a smaller one). The person will then link this account to the online bank by entering information found on a check such as routing numbers and account numbers at the bank website. This linking allows for electronic funds transfer between accounts. After verifying the account the bank will activate the online account and you will be able to make an initial transfer. By logging into the online bank’s secure website you can easily schedule transfers to send money both in an out of the account which usually takes 3-5 days each way depending on the institution.

Are They Safe or Reliable?
It depends. Like anything it pays to do a little research before you set down some of your hard earned cash. Look for a bank that is FDIC insured (insuring deposits up to $100,000 and is either a subsidiary of a larger bank or one that has been around a relatively long period of time. All reputable online banks use encryption to protect sensitive information and financial data.

The Players
The number of new entrants into the field seems to grow every day. This is good because increased competition generally leads to better deals for you. I’ll start with the established banks and then mention some of the new players entering the fray. The most popular online savings banks are HSBCDirect, INGDirect, and EmigrantDirect. These three are all well established and are “safe” bets for potential investors. Recently many of the major banks like E*Trade, CitiBank and others have jumped in offering similar rates and services.

Comparison
I’ll compare the three major online banks only because those are the ones I’m most familiar with.

INGDIRECT: Offers rates of 4.5% APY currently and offers the widest range of online banking services such as home mortgages, CD’s, and mutual funds. They are a subsidiary of a very large dutch financial services company and has “Cafes” in a few major cities. ING has also recently introduced electronic checking accounts (which I don’t have any experience using). ING is the hands down leader in terms of user interface and is very easy to use especially for beginners. There are no fees or minimums, and it generally takes about 3 days to make transfers in and out of the account.

HSBCDIRECT: Offers rates of 5.05% APY currently and has a deal running where it will pay a rate of 6.00% APY on “new money” transfered into HSBC accounts. HSBC is a subsidiary of a large bank headquartered in London. The company is aggressively pursing new clients and offers a ATM card linked to the online account. The user interface is not as easy to use as ING, but works in a similar manner. Similar to ING there are no fees or minimums. I find that it generally takes about 4 days to move money to a linked account.

EMIGRANTDIRECT: Offers rates of 5.05% APY. The bank is not well known for having a great user interface but it gets the job done. EmigrantDirect is a subsidiary of Emigrant Bank which has branches in the NY metropolitan area. The account has no minimums or fees, and transfers take about 4 days in and out of the account.

My Take
I have used ING extensively and HSBC and Emigrant consistently but for a shorter period of time. Based I my experiences I would recommend two of these companies based on what kind of user you are.

If you are somewhat skeptical of online banking or just like things that are easy to use - INGDirect is probably the right online bank for you. The rates are good, transfers are quick and customer service is great (if you ever need them).

If you are a power user who wants the highest rate HSBCDirect is probably best for you. The company has slow transfers (4-5 business days in my experience) and a more difficult to use interface but also has the highest rate. Users can also overcome the slow transfer time by accepting the optional ATM card and using that to draw money from the account.