In our last post we talked about the Rule of 72. We saw that money invested could grow into a substantial sum over time. Compounding interest over time is powerful stuff.
So what happens when the money is invested at today’s saving account rates of, say, .25%? Let’s see, 72 divided by .25 equals 288. So if George Washington’s folks had invested at today’s saving account rates how many generations would have passed before their money doubled?
Of course money invested for the long term may not be invested appropriately in a savings account. Those sorts of account are, however, suitable for short term reserves. In this low rate environment how do we make our money work as hard as it can?
There are a number of financial institutions that pay rates higher than the national average. We’ve recommended a number of these accounts over the years. These higher yielding accounts are generally offered by banks that may not have local offices and so aren’t as easy to access on a day to day basis unless one is comfortable using the internet or telephone for banking transactions.
Ally Bank offers competitive rates and we’ve had good reviews from clients who took the plunge and set up their short term reserves with them. We’ve also hear favorable client reviews about ING Direct, but they have recently been acquired by Capital One Bank so it might be sensible to wait until that transaction is complete to see what the new entity will look like and what rates they are offering.
One way to research institutions with superior interest rates is Bankrate.com. They can show multiple institutions and are a great place to research savings rates, mortgage rates and home equity lines. We often use Bankrate to get a sense of various rates nationwide.
Whichever you choose make sure that the institution you are considering is FDIC insured.