Under the Mattress is not Your Only Option

Way back when, people used to stow away their funds under the mattress and with banks lining up to file for bankruptcy, I don’t blame you for going to back to the tried and true method. There are, however, two other options before you start putting your savings under the mattress or in your checking account, where they are earning you zero money.

The first option is opening up a savings account at a credit union. Credit unions function like regular banks, but they are smaller and usually offer better interest rates. This might come in handy should you need to borrow money for a car, a home, or other expenses in the future, since some credit unions require that you be a customer anyway. The downside to credit unions is that they usually have one branch and there are few ATM locations (but this is a savings account and you are not supposed to be accessing these funds for a night out on the town). You can go to the Credit Union National Association’s website to find credit unions near you.

The second option is opening up a savings account online. For example, EmigrantDirect and Ing Direct are offering a variable annual savings rate of 1.65% and 1.50%, respectively, and require no minimum balances. This is a pretty good deal when you compare them to savings accounts offered by some of the major banks, which usually earn less than 0.25% a year and require minimum balances anywhere from $300-2,500 to avoid fees. The downside is that the savings account is online, so if you want to access the funds, you will have to transfer them to your checking account (but again the point is that you are not supposed to have easy access).

You can easily set up a direct deposit from your paycheck straight to your savings account. While leaving them under your mattress or in your checking account may be convenient, any extra money (especially what little) you may have should be put to work. For example, your $500 in an Ing Direct Orange Savings Account will have grown into $507.50 a year later. $7.50 is nothing to boast about, but it is $7.50 more than if you didn’t put it in a savings account and that puts you slightly above the inflation curve.