Author Topic: Alternatives to Standard Savings Accounts  (Read 1721 times)

ryebread1616

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Alternatives to Standard Savings Accounts
« on: September 25, 2015, 01:08:57 PM »
Hello Mustachians,

My apologies if this question has already been asked before. Did some searching through the forum and couldn't find exactly what I was looking for.

My question centers around better alternatives for saving money than a standard bank savings account. Below if the scenario I am currently in, to give some context.

I have currently reached a point in my life were I really want to start focusing on preparing for early retirement, and becoming financially independent. Being a college graduate in the summer of 2009, I have been conditioned some to be adverse to investing and putting my money anywhere else put the bank. Really my goal since graduation has been to amass enough of an emergency fund, in my standard bank saving account, that I would not have to worry about the possibility of being jobless for a while. At this point I have saved enough were I reached that magic amount of having 6 months worth of expenses saved up. Now I want start looking to may future. I still have some student loans to pay off, which I plan to start running hard at in upcoming months. I am also a big fan of the Mad Fientist, and his ideas around front loading your retirement account(s) (I have a Vanguard 401k through work) at the beginning of the year, and so I am to try and do that as well coming at the beginning of next year.

This leads me to my question around alternatives to my standard bank savings account. At this point I don't plan to add too much more to my emergency fund, and I am wonder what I can do to help my money grow more while it sits, instead of just earning below inflation interest. Ideally I would able to put my emergency fund in an account that is liquid enough, that if something were to happen, I could pretty easily get my money out, and yet still be earning a better interest rate than what I am now.

I have been hearing a lot about Betterment recently, and seems like pretty nice idea. My only major worry centers around the automatic tax loss harvesting they do, and trying to avoid wash sales, since it seems like Betterment just buys Vanguard index funds (same as my current 401k). Wondering if there is a better place to put my money, or if Betterment might be the best bet, and I am just being too paranoid about wash sales.

Any advise or resources would be very much appreciated. Please let me know if you have any questions or if you need any other information at all.

Thanks, 

frugaliknowit

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Re: Alternatives to Standard Savings Accounts
« Reply #1 on: September 25, 2015, 01:17:36 PM »
I use "kasasa" accounts which are basically high yield checking accounts that require you "jump through hoops" (certain number of debit card transactions, e-statements only, maximum balance capped).  It requires careful tracking and is not for everyone.  I earn 3% on one and 2.5% on another.

Here's the link:  https://www.depositaccounts.com/kasasa/

charis

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Re: Alternatives to Standard Savings Accounts
« Reply #2 on: September 25, 2015, 01:33:32 PM »
I have half of my EF in a CD and half in a 1% online savings account.  I am not interested in jumping through hoops for a slightly better return (I can't remember the last time I used my debit card).

MDM

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Re: Alternatives to Standard Savings Accounts
« Reply #3 on: September 25, 2015, 01:36:52 PM »
..what I can do to help my money grow more while it sits, instead of just earning below inflation interest. Ideally I would able to put my emergency fund in an account that is liquid enough, that if something were to happen, I could pretty easily get my money out, and yet still be earning a better interest rate than what I am now.
Other than low dollar teaser offers such as frugaliknowit describes, you must accept the risk of losing money if you seek above-inflation returns.  The more above inflation the expected return, the more likely short term results will be negative.

That is why "emergency funds" are typically kept in low interest accounts e.g., one of these, while "retirement funds" are invested more aggressively.

Lady Fordragon

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Re: Alternatives to Standard Savings Accounts
« Reply #4 on: September 28, 2015, 01:52:43 PM »
My husband and I keep most of our EF in a low fee index fund from Vanguard (we have ~$2300 in savings accounts).  It's definitely a more aggressive option, but it has a better ROI than savings accounts.