Tips on saving your money, continued.
So to continue the thread of thought from the last post, we discovered that high-interest savings account is a good thing. Hankey pointed out in his comment that there are shorter-term CDs. That is true; what I forgot to mention last time was the specific rates that these cds have. Usually there's quite a bit of difference in rates between short-term and long-term CDs( 1 year seems to be threshold for good rates here ). Taking for an example washington mutual. The 1 month cd rate for a $10k or less deposit is at an abysmal 1.98%( as of today ). At ING Direct, the interest rate for a savings account is 4.35%. But I think it's a good strategy set money aside in both high-yield CD accounts- $10k+ deposits, each for at least 12 months to maximize returns, and high-yield savings accounts. That way, in case of emergencies, you have cash immediately available from the savings account; once that fund runs dry, you still have your CDs to fall back on. It's a good idea to put these money in different banks. Which brings us to today's topic. You may notice that some banks, especially the more reputable ones, go out of their way to make sure that you know they are FDIC insured. FDIC is an agency whose sole purpose is to provide the bank customers insurance in case that the bank fails. According to http://www.fdic.gov/ each customer is insured up to $100k per FDIC-insured bank. So if you made two $100k deposits, at two different FDIC-insured bank, you will have a $200k insurance; whereas if you put all $200k in one bank, in the event that the bank fails, you will only get $100k back. CDs and Savings accounts are covered by this insurance. Note that, however, this insurance is for up to a combined $100k at each bank; it doesn't matter how many accounts you have at a particular bank, only the first $100k is insured. The phrase "don't put all eggs in one basket" couldn't be more appropriate here. Also, if you open a joint account, you are insured up to $200k per bank. Finally, retirement accounts( such as IRAs ) are insured up to $250k. I encourage everyone to dig through the FDIC website. The language may be difficult to parse, but it doesn't hurt to understand more about your rights as a bank customer. You can also find information on the assets and capitals, among other things, of banks; that will give you a better idea on what banks to choose when you are shopping for new accounts. As always, you can find the cliff's notes version of these things on wikipedia.org. But nothing can subsitute for the real thing. Comments and constructive criticisms are most welcome. As always, knowledge is power. Stay safe. -風水.李
