Tuesday, September 13, 2005


I have never heard of a bank doing such a thing. EmigrantDirect is giving $1,000.00 to their customers who live in the areas most blasted by Katrina.

The money is already there. Good morning, Sunshine, and oh by the way – here’s an extra $1,000 for you because you’re probably having some trouble right about now.

Wow. From the article, Chairman and CEO Howard P. Milstein says, “We believe that no one is in a better position to identify and tend to the needs of Hurricane Katrina's victims than those who have survived the storm themselves and who call the communities of the Delta region home. We recognize that to some of our customers $1,000 will offer a meaningful amount of support. To others more fortunate, in the wake of the disaster, we would encourage those customers to donate these funds to others in their communities less able to rebuild on their own.”

This in addition to having one of the absolute hands-down best interest rates on a regular savings account out there – 3.50% the last time I checked, with no minimum deposit and no fees.

Damn. I think I’m in love.

I think this might be a good time to beat one of my favorite dead horses.

Have trouble saving money? Have even more trouble staying inside your budget? Do you find that every dime you earn flows right through your checking account like sand through a sieve? Try this.

Open a savings account with a bank like, oh, say, Emigrant Direct (I personally bank with ING right now for this purpose, but that’s subject to change) (especially given that Emigrant is currently paying 3.50% and ING 3.30% - sure, it isn’t much but every little bit helps!). During this process, you will be linking your current checking account to the new bank.

Important things to look for are a good rate of return, no fees, and the ability to easily transfer money to and from your regular old checking account.

Now, have your paychecks direct deposited into the savings account, instead of your checking account. Don’t panic. Relax. You can transfer the money to your checking account in two to four business days, depending on your bank. Bigger banks like Bank of America and Union Bank of California tend to be faster, smaller banks like Bank of the West tend to spend an extra day getting the job done. Credit unions are very hit and miss, though – Chevron Federal has been fabulous for me, but Uncle is like dealing with a petulant two year old. “You want a transfer? From where? Uuuuuuuuuh…well, I’m gonna have to have Myrtle call you about that, she works on Tuesdays from 11:00 to 11:15…”

OK. So now your money is going into an interest-bearing (bonus free money!) account before it hits your spending account. Now, I’m sorry, I’m going to make an assumption based on my own experience: if the money is in either my pocket or my checking account, it will go *poof!* and I’ll be standing there scratching my head going, “Hmm, where did that money go?”

Pay raises into checking account = *poof!*
Overtime pay into checking account = *poof!*
Check from my mom into checking account = *poof!*
Bonus check into checking account = *POOF!* (followed by the dreaded, “How did we manage to spend $5,000 without knowing where it went?!” conversation)

But when that money goes into a saving account, from which you have to intentionally and with forethought draw the cash before you can *poof!* it – it tends to stick around longer. Earning interest all the way, tra-la.

So let’s say your net check is usually $1,100. And you look at your budget and say “I’m going to spend $1,000 per pay period.”

Great – you transfer $1,000, and let the other $100 ride in the savings account. Work some overtime, get a check for $1,400, and you’re letting the $300 ride.

With savings accounts like ING and Emigrant, with no minimum balances or fees to contend with, you can build things up as slowly as you need to. If you open the account with $50, get your first paycheck and take all but $100 out of the account, fine. The $100 still gets 3.50%, you don’t get any $15 account maintenance fees or anything (as you might with some of the Big Banks).

Everybody should build up a savings cushions equal to three to six months of normal living expenses. But very few of us do, because, well, it’s hard. There are a thousand and one things to spend our money on, we’re hit with commercials every moment of every day, and merchants are making it ever-easier for us to spend every dime we earn as fast as we earn them on everything from lattes to Gucci bags.

This is the easiest way I’ve found to build up an emergency fund. As disasters natural and manmade keep showing us, again and again, luck favors the prepared.

Be as prepared as you can, for whatever comes your way.


wrnglrjan said...

Something interesting I learned recently (OK, I was told by a banker -- I haven't checked it out on my own), though.

There is a federal regulation on savings accounts that limits the number of transfers they may do per month. I think it's in the neighborhood of 6. So if you've already done 6, it would be, to put it mildly, bad, to discover you needed another on the 28th of the month to cover your mortgage payment or something.


Mother of Chaos said...

Yes, the infamous "Regulation D" - banks don't have to keep as much money at the Federal Reserve on a "non-transaction" (savings) account as they do on a transaction account, hence the higher interest rate. To keep abuses and liability low, Federal regulations say that a non-transactional account should not have more than six preauthorized (checks) or scheduled (online) withdrawals per statement period or month.

BUT! There is a way around it. If you do your transfer or withdrawal in person, either at a branch or at an ATM, it doesn't count toward the six. Inconvenient - but not as inconvenient as not having your mortgage payment! :)

The other thing is, banks have a certain discretion when it comes to the 'limit of six' thing. Some banks simply won't allow the 7th. Some will allow it, but will charge you a fee. Some will merely send you a nastygram saying "Don't do it again." Habitual offenders are subject to having their accounts "reclassified" as regular transaction accounts.

In seven years, I've never gone over the 'six transaction' limit. I HAVE gone over the 3 checks per cycle thing, once. They (E*Trade) charged me $12.95, and I still haven't forgiven them. :)

mapletree7 said...

That is just a fantastic thing.

Myownigloo said...
This comment has been removed by a blog administrator.
Myownigloo said...

I only wish the thought of losing interest was enough to keep me from withdrawing all my savings.

I have to make my savings much more inaccessible than you do.

I have my employer send my budgeted savings directly to the credit union where I used to live (700 miles away or so). I destroyed the ATM card for the credit union and when they renew it and send me another, I cut it up immediately. This means I can't access the cash from an ATM.

THEN when the savings account reaches $1,000 plus the minimum, I immediately buy a savings certificate for $1,000. I try to plan the CDs so that ultimately I'll have one coming due every month, sort of like a CD ladder.

Someday I'll have enough in CDs to equal three to six months of expenses and there will always be emergency funds available within one month of the emergency.

THAT's my emergency fund.

Hopeless, I know.