Got Interest? Making your money work hard for YOU

We are all looking for the holy grail, passive income and interest growth is the first step.

I’ve been managing money for longer then I realized. I thought it started after I graduated college but really it was before then. It was really in high school.

I use to have an account at a credit union that I rarely had access to. It was 2 cities away and it’s were I kept my emergency money.

How funny to look back now and realize I always had an emergency fund. This was the money I had saved while growing up.  It totaled $1,000 but it fluctuated up an down but I almost always had at least $700. It was my child hood account, so I had no debit card for it just the card that had the account number. I kept this account open specifically because it was so hard to get to. It was meant to be for emergencies. I knew that if I needed to, I at least had $1000.

I also had a WaMu account where I kept the money I earned in college. (remember Washington Mutual?)

I remember opening my quarterly statement from the credit union. Always curious to see the interest I had earned and always reading about how if I earned more then $10 it would be reported as income. Wow! I use to think $10 in interest wouldn’t that be great, but I really didn’t understand the system.

Fast Forward

I graduate from College and in an effort to have my money earn more money I devise a plan.

CDs, at some point I had become aware of CD’s and their higher interest earning potential. So I drop $1000 into a 1 month one. I saw wow I earned $ .25. in just a few months. More than I had earned in several years in a plain old saving account.

I wish you could hear me chuckle.

How funny that $.25 made my eyes gleam with possibilities. I increased the quantity somewhere to $3,000 and earned more interest. But I soon realized I could earn more if I just did a 6 month CD.

6 months I thought that’s a long commitment

But I had gone 6 months not drawing on my monthly CD just renewing it and adding some deposits. That’s when I realized its not just that I don’t get to pull my money out, I also don’t get to deposit more.

That’s when it clicked. Well, I could just open a new one.

Aaahhh ha! That’s it! I’ll have two 6 month CDs spaced 3 months apart in effect making a 3 month CD and getting the much higher .2% interest rate. All I have to do is divide the money evenly and place about $3500 in each.

I was quite proud of myself.
Gaming the CD system. Now I was earning about $4 every 6 months. The best part all my $7000 were earning the higher interest but I had access to $3500 four months a year.

Woo Hoo what a success story! Don’t you think?

Fast Forward

This year I finally opened my Barclay account. A while back someone had made a comment about money market accounts and how you earned way better then saving account. Well I did the research and I couldn’t find a money market account but I did discover the much more competitive online banking options.

Online banking I thought is that even safe? I was nervous sure, but it was FDIC insured. So I took the plunge!

Long story short now in less than 6 months I have earned about $14. That is 4 times more then I was earning in the CDs.

I won’t be leaving my money sitting around in a poor excuse of a saving account ever again.

So here is where it gets good for you. Story time is over now its time for action so here are the Barclay stats.

Barclay stats.

FDIC insured
Limit 6 withdrawals a months
Pays currently .9% (as of 10/1/14)
minimum balance none so $1
About 10 day wait to get funds out.

What its not doing

Locking your money up!  (you can deposit and withdraw every month. Now that is what I call flexibility!)

My advice

You don’t need to take the 10 years to learn about banking like I did.

Here is my step plan
1. Save your emergency fund $1000 to start
2. Skip the CD’s they tie up your money and don’t pay up.
3. Open an online savings account. I am partial to Barclay but there are other choices.
4. Move money to Barclay start with the $1000

Have you paid off all your debt? Yes? move to step 5

5.Set up automatic saving to your online account $100 a month at least
6. Watch your money grow
7. If you do have an emergency put it on your credit card. Earn points
8. Then transfer money from your online account. The 10 day wait is fine and you will not pay interest on your credit card if you pay the balance in fullIf you do have an emergency put it on your credit card. Earn points
9. Celebrate the fact that you are earning free money
10. Save 3 months expenses
11. Open vanguard fund with all other savings

This goes with out saying that step 5 and on is only after you have paid off all your debt.

Maybe your still not comfortable with the idea of investing or having your money somewhere you can’t get to it.

Because of how long it took me to learn I had practice with  baby steps. First with my credit union being to far to get to easily and then with the CDs that limited my access. So I’ve gotten comfortable with the idea of not being able to get to all my money on that same day. I’ve built that up.

So take some time to get comfortable with the idea keep it in your brick and mortar bank for a few months but don’t wait to long.  Each day that passes those are dollar you are loosing. After 2 months move it over .

This should hopefully get you more comfortable with the idea of a retirement account and just regular taxable investing. You’ll definitely need to build up patience and commitment to learn to let your money ride the bumpy upward trend.

Update: It occurred to me that my point was to soft. What I am saying is that if you are going to be saving big quantities of money for a safety fund you should have it in the best vehicle. Earning the most interest.

What do you think? Leave me a comment.