Banks Leadership
|
||||||||||||||||||||||||||||||||||||||||||||||||||
| BANKS | |
 |
|
| Money | |
| Savings Where to stash your cash now | |
| With talk of recession in the wind and stock-market turbulence in the headlines almost daily, you may be wondering where, aside from the nearest mattress, to stow your money until the storm passes.
Depending on your goal --- maximum safety, quick access, or a bit more interest --- you have several worthy options to think about for those short-term savings. But even before you start to save, consider reducing any credit-card debt you might have. It makes no financial sense to put your savings into accounts that are earning 3 or 4 percent if you're paying 15 percent interest or more on your credit cards! GOAL: MAXIMUM SAFETY If preserving your savings is paramount, a plain old FDIC-insured savings or money-market account will suffice. Just bear in mind that you'll have to keep the account total under $100,000 (still the MAX the FDIC will insure per depositor non-retirement accounts) or spread your savings among several institutions. Money-market accounts typically set limits on the number of transactions you can make each month and also have a minimum balance requirement (although there is none at Flagstar Bank in Troy, Mich.). If you want to avoid those restrictions, choose a regular savings account instead. Our online search turned up yields of 4.02 percent at E-Trade and 3.60 percent at Emigrant Direct. You can open an account online by transferring money from your checking account. Have your account number and the Bank's routing number handy (you'll find them on your checks). Another safe, bank-based option would be FDIC-insured certificates of deposit. Their returns have lagged behind those of the best savings and money-market accounts lately, but they do allow you to lock in a rate that won't fall further. Six-month and one year CDs were both paying around 3.1 percent in March. You might be able to earn a tad more interest if you buy your CDs through a brokerage firm. Just make sure they still carry FDIC protection. For example, Charles Schwab was selling one-year CDs that paid 3.60 percent in March. GOAL: QUICK ACCESS If you want your savings to be available at a moment's notice, try a money-market fund from a mutual-fund company or brokerage firm. Such funds invest in highly liquid, safe securities such as CDs, government debt, and commercial paper (short term obligations issued by corporations). In March Vanguard Prime had a seven-day yield of 3.64 percent; the Fidelity Cash Reserves fund paid 3.53 percent. If your furnace conks out or you have to pay an unexpected medical bill, you can usually just write a check. And the returns on money-market funds are typically higher than those on the money-market accounts that traditional banks offer. Just keep in mind that money-market funds, unlike the bank kind, are not federally insured. But the short maturities of the securities they own make them relatively safe. (follow your instincts). Depending on your tax bracket, you may also want to consider a tax-exempt money-market fund. In March, some tax-exempt funds were returning 3 percent or more. That's the equivalent of a 4 percent yield for someone in the 25 percent tax bracket. GOAL: MORE INTEREST If interest is your main consideration, there's a strategy that's a bit riskier and harder to execute but could provide a greater return. It makes the most sense if you are saving up for something you plan to buy or do in two or three years, because it may be volatile in the short term. What you do is make an equal investment in no-load, short-term bond funds and bank-loan funds (also known as floating rate funds). Both are sold by mutual-fund companies and brokers. When a Money Lab tested this strategy, it found that a 50-50 split between the two would have beaten the return of the average money fund in 13 of the last 15 years. The mix also beat the average one-year CD in 12 of the last 15 years. Average returns were 5.19 percent over the past 10 years-a figure that looks pretty attractive now. Especially to retirees.
|
|
| banks and personal money management | |
| HOME |
|
| How to keep your friendly (Money-Keepers) from robbing you blind |
|
If you are a person of average means and assets, government financial policies will rob you of well over $100,000 during your lifetime. You will pay more than you should for your mortgages, credit cards, and other loans. You will be cheated out of a fair return on your savings and IRA deposits.
Government financial policy is not your friends: Keepers of your money are, in fact, your worst financial enemies. The community office---which once weighed a loan applicant's character above his collateral--are being squeezed out by a handful of big corporations. These huge institutions cater to major corporate accounts and are scarcely regulated by the government, which depends on their financing to keep it afloat. The institutions attitude toward small customers is simple---our way or the highway. The interest rates some Americans were charged as late as 1992 was criminal, corporations still refer laughingly to this crime as "Red Lining". The whole country is now undergoing this insult at lending institutions African Americans have endured since 1890. |
|
| Tell us your story and vote for basic rules for change: | |
Money Talks
Washington is Listing, publish any practical money saving, Ideas!
Do you have Top money saving tips for Obama and Mccain? Share it! We'll publish the best....
| Basic rules | To do's |
|
| Forget about finding a one-stop financial supermarket. You may wind up at Lender A for a checking account, at Lender B for a savings account, and at Lender C for a mortgage. Anyway banks do not value your loyalty. They value only your money--and the more of it they can take from you, the better they like it.
The mortgage is the largest investment most people ever make---and the one where banks take greatest advantage. Most people decide on a mortgage based on whether they can afford the monthly payments. They rarely consider--nor do banks openly disclose--that at prevailing interest rates, homeowners repay about $4 for every dollar they borrow over the standard 29- or 30-year term. In other words, a $100,000 mortgage will cost them about $400,000. Advice: Accelerate your payments against the mortgage's outstanding principal. A negligible increase in your monthly payment--perhaps 4%-- can save you 25% or more of the amount you ultimately repay the lender, and shorten your obligation to 20 years or less. While some experts advise keeping the longer term for its tax advantages, this is a big mistake for the great majority of consumers. Even if you are in the 28% tax bracket, every dollar of unneccessary interest will still cost you 72cents after taxes--money you could be investing for your own benefit rather than the bank's. (Real Estate Calculators) |
| Other mortgage scams: |
|
| Unfortunately, the prime interest rate will tend to increase in reverse proportion to our economy's health. In other words, your mortgage payment soars just when it is most likely that you may lose your job or business. Even if you hold steady, there's a fair chance you won't be able to afford the larger payments. Consider: If your ARM is based at 10% interest and then rises to 13%, your interest costs have actually risen by 30%--not the innocuous sounding "three percentage points" advertised by your institution. On a $100,000 mortgage, that could translate to several hundred dollars more a month--a prescription for foreclosure.
Advice: Stick to a fixed-term mortgage, unless you are certain you will be selling your house before your ARM interest rate can substantially increase.
|
| Worst case: When you need to refinance the loan after paying off the balloon, your increased mortgage needs may exceed the property's appraised value. After the lenders turn you down, you may have no option except to sell the house--at a loss. |
| Advice: Avoid this one at all costs. |
|
| This new mortgage vehicle is very popular these days. In most cases, however, it is a gigantic rip-off. After 30 years of monthly mortgage payments, the homeowner trades in all that equity for 5 or 10 years of moderate income.
An "open-term" reverse mortgage allows for permanent residence until death, but it is available only on premium homes in excellent condition. And if something unexpected happens to the elderly homeowners, the bank has hit a bonanza. |
|
| Since your home equity is your least liquid asset, you should save it for true emergencies. Any other purpose (to finance a car or home improvement, for example) represents an unacceptable risk...if you default on the loan, after all, you could be faced with foreclosure. |
| Money Managing Tips | |
|
|
