As many of you know, I’m planning on moving to Italy some time between April and October of 2011. Though I’ve made a conscious effort to build up my savings and monitor my spending over the last year, I wanted to see if there was anything else I could do to make my money work harder for me.
So I decided to meet with a financial planner. Though I’m still making decisions about long term investments (because they involve a lot more thought and effort—my brain is still absorbing this information) —I have already made a couple of easy adjustments to the way that I manage my finances—that have made a big difference!
One of my financial planner’s first suggestions (and the simplest thing to do!) was to look into money markets and savings accounts. Since money market returns pretty much suck right now (less than 1% annually) I started looking into online savings programs. But first, I called my credit union to find out what my savings account was earning, so I’d have a number to compare my research to. Only during the course of this little project did I realize that I had never even KNOWN what my savings was earning before! Turns out, because it’s a credit union, I get 6% on the first $500 in my savings account, which is pretty stinkin’ good, if you know anything about savings accounts (which I do now!). But after $500, my money only earns .25%, which is about average.
This is where the research part comes in. After using GOOGLE to look up “high interest savings accounts”, I came across Smartypig.com . They are currently the highest returning savings account program that I have found. And with write ups in Forbes and numerous other publications, I know that they’re legit. The accounts are easy to set up, name, and use, and you can even send links to your friends and family to contribute to your cause!
Only down sides:
1) When I opened my accounts, the APY was 2.15%, about a percent higher than anywhere else. Currently, the APY has fallen to 1.75%, which although still competitive is less appealing. Maybe I missed it in the fine print, but as a consumer, I was disappointed to find out that this lower APY doesn’t just apply to new accounts, but also affects my existing accounts that I opened at 2.15%. Apparently the APY is flexible and not fixed, which I’m not a huge fan of. Still, the economy sucks, so what are you gonna do? Just hope it goes back up later.
2) When people contribute to your account or ‘savings goal’ they are charged an overhead fee. Fees suck, but again…what are you gonna do? It’s a banking institution.
Still, gripes aside, this was a valuable lesson. Maybe I don’t have a ton of money in my accounts, so either way 1.75% or 2.15% isn’t going to net me that much at the end of the year. But it’s the beginning of a good habit—so when I do have a million dollars in there someday—I will reap a larger reward, just by storing my money in a different place.
I started my “Cappuccino Fund: Moving to Italy” and an “Emergency Fund” (which I’ve never actually had before). By having an automatic draw from my checking account, I factor that money into my budget automatically at the beginning of the month, instead of counting it as extra spending money and then throwing the excess into savings. After only 4 months, I have saved over $1,000 combined in the two accounts. Not too shabby! Give it a try and see how your spending habits change, and how much you can save!