What to do with savings after you have enough for an emergency?

Kendro

Kendro

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I find that the closer you are to thirty, the more pressure there is to start saving. I miss the days when I was in my early twenties when I didn't make a lot of money and basically blew my paycheck on whatever I wanted.

I have a year's worth of living expenses in an emergency fund but I'm not sure if it is smart to keep dumping surplus money into a low interest savings account. Does anyone have any tips to keep with the rate of inflation because the 0.2% that most banks offer for savings account just won't cut it.

I dabbled in day trading but after all the losses and gains, I'm pretty much at a net balance from when I started. Then again I didn't profess to be the next Warren Buffett, that was more for shits and giggles than anything else.
 
Retire. There's never enough money for an emergency lol. CDs are the safest investment with higher interest really. As long as you have a 401k going, then I'd say just use the money for leisure or set a goal for something to buy while it earns interest.
 
There's always more to save for- do you own a home? Buy one or be ready for repairs. Buy or fix a car. Retirement. Vacations. It's never a bad idea to be putting money away- if for no other reason than to have it when you find something you really want, or need.
 
Start putting more away for retirement, kids college education and other things along those lines.

If you have a 401(k) through work, make sure you're maxing that out first. If not (or after maxing that out) dump money into an IRA or college savings fund depending on your needs.
 
Stock up on guns and ammo?:D

I'm actually a little bit in the same boat. I don't trust the stock market, CD rates are pretty low and other options seem even more risky so currently I just let that little bit of extra money sit, after all the holidays are right around the corner.
 
Why are you only getting .2% when there are plenty of online banks that pay .9-1.2%?

I'm in the same position you are OP. I have no debt and I have plenty in savings for a rainy day.

Personally, I max out my Roth IRA, then 401k, then invest where I see fit after that. I'm to the point where I want very little, so I don't have any short term goals. Any emergencies (albeit rare) come out of my checking account. For now, I continue to stockpile money where I see fit.
 
Save for a home downpayment. Buying the right home will fix all problems concerning too much saving. :)
Increase investments at work (stock plan, 401k, etc.)
Invest in a mutual fund.
As stated, look for a better interest rate -- ING and USAA are two. CNN money and the Consumerist have articles on banks that don't suck.

You might consider investing in other currencies or commodities, but unless you're trained in finance, that and day-trading are indistinguishable from gambling, as it sounds like you've learned.
 
[quote name='mtxbass1']Why are you only getting .2% when there are plenty of online banks that pay .9-1.2%?[/QUOTE]


This. I switched to ING for my savings a little over a year ago and I wish I switched sooner. Hell, the ING checking account has a better interest rate than savings at my B&M bank.
 
I am 25, and in a similar position that you are in, and here are my priorities as of right now....

1) Buy a house (I live in Vegas and it is a buyers market)
2) Furnish said house
3) Start a Roth IRA (I have my 401K contributions past the max matched by my company, so anything above that I want to start dumping into an IRA)
4) Save for a new car. (Currently drive a paid for 2006 Charger with almost 90,000 miles, would like to pay cash for a new car in 3-4 years)
 
[quote name='blindinglights']This. I switched to ING for my savings a little over a year ago and I wish I switched sooner. Hell, the ING checking account has a better interest rate than savings at my B&M bank.[/QUOTE]

Yeah I have ING direct and HSBC savings accounts online. I love that with ING you can have a bunch of sub accounts for different savings goals.
 
[quote name='TheBigAndy']Yeah I have ING direct and HSBC savings accounts online. I love that with ING you can have a bunch of sub accounts for different savings goals.[/QUOTE]

I will third this ING comment. I've been with them for over 4 years; checking, savings and brokerage account. I would highly recommend.
 
I have direct deposit with Chase through my company. Is it advisable to transfer all of my savings into an ING account, and still have my Chase for bills and checking? That 0.9% rate is a lot better than the 0.2% that I'm getting now.

I prefer to keep my Chase checking account since I live in NYC and there are tons of Chase ATM's everywhere.
 
[quote name='Kendro']I have direct deposit with Chase through my company. Is it advisable to transfer all of my savings into an ING account, and still have my Chase for bills and checking? That 0.9% rate is a lot better than the 0.2% that I'm getting now.

I prefer to keep my Chase checking account since I live in NYC and there are tons of Chase ATM's everywhere.[/QUOTE]


ING requires you to have a checking account from a brick and mortar linked to your ING account since they have no actual locations.
 
[quote name='Kendro']I have direct deposit with Chase through my company. Is it advisable to transfer all of my savings into an ING account, and still have my Chase for bills and checking? That 0.9% rate is a lot better than the 0.2% that I'm getting now.

I prefer to keep my Chase checking account since I live in NYC and there are tons of Chase ATM's everywhere.[/QUOTE]

That's what I do, just swap "Chase" with "Wells Fargo."
 
[quote name='mtxbass1']That's what I do, just swap "Chase" with "Wells Fargo."[/QUOTE]

Yeah that is what I do too. I don't even havea debit card for my HSBC savings, which means I can't spend the money without doing a transfer, thus I can't impulse buy.
 
[quote name='mtxbass1']That's what I do, just swap "Chase" with "Wells Fargo."[/QUOTE]

Same with me and TD (used to have PNC back in Ohio but switched since there's no locations out here).
 
OP, you mentioned Warren Buffett and daytrading in the same sentence. Buffett is in no way a daytrader. When he buys a stock he is holding for 5 years+.

Daytrading is no place for your savings funds. Daytrading is only for funds that you are willing to lose. Regardless of what people say, it is gambling. I've been trading for close to 20 years now and it is gambling.

That being said, investing....not daytrading....in the stock market for the long term is still your best bet IMO. CD's pay nothing, savings accounts pay nothing and they will continue to pay nothing for years to come thanks to the Fed's policy to keep rates low in an attempt to force additional investment into the stock market.

I find the best values to be large cap US multinationals......outside of financials.

Buying a rental property is also a pretty good option but obviously you would have to have the time to maintain the property and deal with the tennant or find a decent management compnay, which would obviously mean forking over a sizeable portion of your rental income.
 
[quote name='BillyBob29']OP, you mentioned Warren Buffett and daytrading in the same sentence. Buffett is in no way a daytrader. When he buys a stock he is holding for 5 years+.

Daytrading is no place for your savings funds. Daytrading is only for funds that you are willing to lose. Regardless of what people say, it is gambling. I've been trading for close to 20 years now and it is gambling.

That being said, investing....not daytrading....in the stock market for the long term is still your best bet IMO. CD's pay nothing, savings accounts pay nothing and they will continue to pay nothing for years to come thanks to the Fed's policy to keep rates low in an attempt to force additional investment into the stock market.

I find the best values to be large cap US multinationals......outside of financials.

Buying a rental property is also a pretty good option but obviously you would have to have the time to maintain the property and deal with the tennant or find a decent management compnay, which would obviously mean forking over a sizeable portion of your rental income.[/QUOTE]


Agree with almost everything here, though you may also want to consider individual high yield dividend stocks as well. Setup a DRIP (Dividend ReInvestment Plan) with your eTrade or Fidelity or whatever and get thee some stable bluechips that pay you to own their stock. If you set it up with dollar cost averaging, you could end up owning 100's of shares of a company that trades at $50 for literally pennies to the dollar in actual out of pocket costs.
 
Keep saving never know how big an emergency is going to be. I keep saved at minimum enough to survive for 3 months at all times.
 
[quote name='nasum']Agree with almost everything here, though you may also want to consider individual high yield dividend stocks as well. Setup a DRIP (Dividend ReInvestment Plan) with your eTrade or Fidelity or whatever and get thee some stable bluechips that pay you to own their stock. If you set it up with dollar cost averaging, you could end up owning 100's of shares of a company that trades at $50 for literally pennies to the dollar in actual out of pocket costs.[/QUOTE]

I think DRIP accounts are a great way to invest a small amount of money over a long period of time as long as you realize the risk. They are the equivalent of pressing your bets at the craps table without an option of cashing out (sorry for the use of the gambling analogy but it's fitting).
 
[quote name='Jodou']Retire. There's never enough money for an emergency lol. CDs are the safest investment with higher interest really. As long as you have a 401k going, then I'd say just use the money for leisure or set a goal for something to buy while it earns interest.[/QUOTE]

CDs are actually a bad idea. They are considered a negative return because the 1099 you get at the end of the year will negate, and usually cost you, whatever you earned with their low interest rate.

Just keep saving man. 401k is nice but there are plenty of other options out there to put your money to good use - without relying on the market.
 
[quote name='crushtopher']CDs are actually a bad idea. They are considered a negative return because the 1099 you get at the end of the year will negate, and usually cost you, whatever you earned with their low interest rate.[/QUOTE]
Huh, good to know. Didn't realize you had to file them on your tax return. Then again, I've never dabbled in them.
 
[quote name='Jodou']Huh, good to know. Didn't realize you had to file them on your tax return. Then again, I've never dabbled in them.[/QUOTE]

Earnings are treated as income and are subject to taxes. Same with earnings on your checking/savings accounts.
 
[quote name='mtxbass1']Earnings are treated as income and are subject to taxes. Same with earnings on your checking/savings accounts.[/QUOTE]
No, it makes sense. It's just one of those things you don't really think about until you've done it.
 
[quote name='kill3r7']I think DRIP accounts are a great way to invest a small amount of money over a long period of time as long as you realize the risk. They are the equivalent of pressing your bets at the craps table without an option of cashing out (sorry for the use of the gambling analogy but it's fitting).[/QUOTE]

at that point it isn't gambling. You're not "betting on red", you're using a factual basis to determine the safety of long term investment. While the price of the stock will fluctuate, most companies will be very steady with their dividend yield. I have one in particular that now trades at $50 give or take $5 per month. When the quaterly payout comes along, I have enough shares that I usually get 1.5 shares these days for free. Imagine if I could bump that by 10x! That'd be $2k per year (10x50x4) in free money. The amount of investment to get there would probably earn me $40-60 at current rates in CDs. And taxed at 15% too. Seriously, there is NO reason to not have some decent drips in your 401k/IRA/Personal account.

And you can cash out whenever you want too. Not sure where that gem of misinformation came from.
 
[quote name='Jodou']No, it makes sense. It's just one of those things you don't really think about until you've done it.[/QUOTE]

heh. Trust me. You think about it come tax time when you get like 8 1099-INT forms.
 
[quote name='nasum']at that point it isn't gambling. You're not "betting on red", you're using a factual basis to determine the safety of long term investment. While the price of the stock will fluctuate, most companies will be very steady with their dividend yield. I have one in particular that now trades at $50 give or take $5 per month. When the quaterly payout comes along, I have enough shares that I usually get 1.5 shares these days for free. Imagine if I could bump that by 10x! That'd be $2k per year (10x50x4) in free money. The amount of investment to get there would probably earn me $40-60 at current rates in CDs. And taxed at 15% too. Seriously, there is NO reason to not have some decent drips in your 401k/IRA/Personal account.

And you can cash out whenever you want too. Not sure where that gem of misinformation came from.[/QUOTE]

As I stated earlier drips are a great tool for long term investment however there is still a certain amount of risk involved. Also, you can take your money out whenever you want but there will be a tax penalty for it.
 
[quote name='dohdough']How would CDs be negative investments? You're taxed on interest alone, not the value.[/QUOTE]

Most CD's do not even pay enough to keep up with the rate of inflation, so that could be considered a negative investment.
 
[quote name='dohdough']How would CDs be negative investments? You're taxed on interest alone, not the value.[/QUOTE]

Did you not read my post? Pretty sure I explained it there.
 
[quote name='kube00']so i I didnt want to put small amounts of money into CDs whats the next best option?[/QUOTE]


What's your goal? To continue to save money? I mean, do you have faith in the market right now? CDs are a bad idea during a recession, or whatever it is that you want to call the status of our economy, because of their negative yield curve in regards to interest rates and inflation. Plus, their rates are pretty weak. Do you have a 401k? What is/are your source(s) of income?
 
[quote name='kill3r7']As I stated earlier drips are a great tool for long term investment however there is still a certain amount of risk involved. Also, you can take your money out whenever you want but there will be a tax penalty for it.[/QUOTE]

There's a "tax penalty" on any positive investment? Unless you're saying that pulling out of a 401*(k), well then I see what you mean, but you can still setup an etrade/scotttrade/ING/etc... account and create your own portfolio outside of a tax sheltered deal.
I guess I'm not sure what exactly you're getting at. No biggie though, I'm sure we mean the same thing we're just coming at it from a different direction.
 
So many questions :) I guess my goal is to continue to save money. I have a decent amount of mutual funds, and some savings split between a few banks and ING. I've got a Traditional Roth as well. Maybe I should get into a 401k, I know my employer has something for me a 401B? I guess I could start putting more money into that from my paycheck

My question is with something like a 401k if I leave the job I know I could continue to contribute to it on my own. Would there be a penalty for cashing it out?
 
[quote name='kube00']So many questions :) I guess my goal is to continue to save money. I have a decent amount of mutual funds, and some savings split between a few banks and ING. I've got a Traditional Roth as well. Maybe I should get into a 401k, I know my employer has something for me a 401B? I guess I could start putting more money into that from my paycheck

My question is with something like a 401k if I leave the job I know I could continue to contribute to it on my own. Would there be a penalty for cashing it out?[/QUOTE]
It's called a 403(b). It's the same thing as a 401(k) except it's for schools, nonprofit, governments, hospitals, that type of shit. There are no penalties for rollovers if you roll it into another 401(k)/403(b) or your own IRA, unless you leave your employer before their contribution vests (and some employers don't have vesting rules so you don't need to worry about it). Your contribution has no penalty. If your employer offers a match start contributing ASAP so you get the maximum match.

I can help answer more questions if you have any, I audited these for a living. However, you need to get all the plan info from your employer, to know if they match or have vesting rules.
 
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[quote name='Kendro'] Does anyone have any tips to keep with the rate of inflation because the 0.2% that most banks offer for savings account just won't cut it.
[/QUOTE]
max out your 401K and Roth IRA and invest in index funds.
 
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[quote name='maraba']max out your 401K and Roth IRA and invest in index funds.[/QUOTE]

Max out meaning up to what my employer matches or the max max (for lack of a better word)?

I admit I'm a newbie when it comes to Roth IRAs. Do you set up one through your employer the same way you would a 401k?
 
Found out for the 403b for work that do not match and you have to work for the company for 6 years to be fully vested
 
[quote name='Kendro']Max out meaning up to what my employer matches or the max max (for lack of a better word)?

I admit I'm a newbie when it comes to Roth IRAs. Do you set up one through your employer the same way you would a 401k?[/QUOTE]

I'd max out the 401k period, but definitely go up at least to the company max.

Roth IRA can be from any investment firm. If you're employ offers them through their retirement plans, you can get one that way. Or you can start one with any brokerage of your choosing.

You put money into them after tax now (just out of your take home after tax pay), and they aren't taxed when you take money out of them after hitting retirment age. Traditional IRAs are funded pre-tax now (come out of your pre-tax paycheck), but you pay income tax on them at whatever tax bracket you are in when withdrawing funds during retirement.
 
[quote name='dmaul1114']I'd max out the 401k period, but definitely go up at least to the company max.

Roth IRA can be from any investment firm. If you're employ offers them through their retirement plans, you can get one that way. Or you can start one with any brokerage of your choosing.

You put money into them after tax now (just out of your take home after tax pay), and they aren't taxed when you take money out of them after hitting retirment age. Traditional IRAs are funded pre-tax now (come out of your pre-tax paycheck), but you pay income tax on them at whatever tax bracket you are in when withdrawing funds during retirement.[/QUOTE]

I'd imagine the advantage to a Roth IRA is that you're taxing the funds while you are in a lower tax bracket? Assuming you make more money as you grow older and get more experience?
 
[quote name='Kendro']I'd imagine the advantage to a Roth IRA is that you're taxing the funds while you are in a lower tax bracket? Assuming you make more money as you grow older and get more experience?[/QUOTE]

More or less.

Plus money is likely going to be tighter for most people in retirement, so better to pay the taxes now than then.
 
I'v always been a saver not a spender. I had $27,000 saved up when I graduated college and had it all paid off. but now 5 years later I'v got like $8,000 left over.
You end up spending ALOT of money when you get a house/have kids/etc, hopefully i don't run out...
 
[quote name='Velo214']I'v always been a saver not a spender. I had $27,000 saved up when I graduated college and had it all paid off. but now 5 years later I'v got like $8,000 left over.
You end up spending ALOT of money when you get a house/have kids/etc, hopefully i don't run out...[/QUOTE]

I don't know about you, but sometimes I catch myself being lazy. Where eating out once or twice a week turns into 3 or 4 times a week or more. Just have to analyze where your money is going every now and then and make adjustments, it's completely normal.
 
Giving this a healthy bump since I didn't invest jack since the OP.

I was looking into starting a mutual fund with Vanguard.

If I have a years worth of emergency savings saved up, should I dump all the leftover excess into a mutual fund? I imagine I would end up buying a house 2 or 3 years from now so are mutual funds still a good investment for just a few years?
 
[quote name='Kendro']Giving this a healthy bump since I didn't invest jack since the OP.

I was looking into starting a mutual fund with Vanguard.

If I have a years worth of emergency savings saved up, should I dump all the leftover excess into a mutual fund? I imagine I would end up buying a house 2 or 3 years from now so are mutual funds still a good investment for just a few years?[/QUOTE]

A few things.

Does your employer offer a retirement option?

Have you maxed out your Roth IRA for this year?

How active do you want to be managing your investments?

Do you know what an expense ratio is?
 
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