Killing Two Birds

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I got the idea for my "Financial Goals" from the book I'm currently reading: Women & Money Owning the Power to Control Your Destiny.  In it, Suze Orman has what she calls the "Save Yourself Plan."  Geared specifically towards women's finances, each chapter outlines what every woman should do/have financially.  Each set of goals is designed to go in order and can be done in small steps, or conquered all at once.  The book spaces them out by month, so that accomplishing them will only take about 1-3.

Two of my financial goals for the month of July were to check the interest rate my current savings account offers, and look for banks that currently offer higher rates.  I also wanted to check how the interest on that account was compounded.  Next I wanted to set up a money market account where I would put all of my funds saved from the Spending Fast, and eventually turn into my Emergency Savings with eight months of income.

Today, I killed two birds with one stone!

I first checked the Federal Funds Rate.  The Federal Reserve is our government's bank. The big wigs at this bank meet eight times a year and decide if they are going to lower, raise or leave unchanged the key interest rate, the Federal Funds Rate.  All of our country's banking institutions base their interest rates off of the Federal Funds Rate.  Per Suze Orman, any institution offering an interest rate that is less than ¾ of a percent lower than the Federal Fund Rate is not worth banking with.  For example, if the Federal Reserve Rate is 5.0%, don't bank with anyone offering 4.25% or less!  Today, the Federal Funds Rate for general savings and Money Market Accounts is 0.25%.  (Seriously?  That number is tiny!)

Suze is getting my hopes up, because in her books, every interest rate she mentions is upwards of 8.0% (but this book was written back in 2007, before the economic crisis).

I have heard that banks with the highest interest rates are actually online banks, but I still wanted to check as many as I could.  I went to Bank Rate and searched for Money Market Accounts with the highest APY (annual interest rate, not the "Rate Post Intro"), taking into consideration that I also wanted an account with no minimum balance and no fees.  Some banks require that you have a certain amount of money (usually in the $1,000 range) in your account in order to get the interest rate advertised; or in order to avoid banking fees; and some banks charge a yearly fee just for having an account with them.  I say all of that is money WASTED!  You may as well throw your money in a fire if you have an account that charges fees.

DING DING DING!

I found one!  I checked out Sallie Mae's offer.  A few of my student loans are with Sallie Mae, so I am a little familiar with them.  After reading and doing a little more research, I decided to open a money market savings account with them.  I was able to open an account with no fees, no minimum opening deposit, and a 1.15% interest rate that is compounded daily!  (1.15% is almost 5 times the Federal Reserve Rate!)

I am now going to use this as my primary savings account from now on.  I am not closing my current savings account at my credit union however, because I have a student loan who's monthly payments are automatically withdrawn from that account.  Plus, it's always a good idea to bank through a credit union!