Reader Question: Where to Keep Your Savings?

As 20’s Finances continues to grow, I have been getting more and more interaction from my readers. I had one reader contact me and ask what they should do with their money. She claimed that she had a lot of money sitting in her bank account, not getting a high interest at all. She first asked what to do with her money in general and also asked where she should be saving her money. While I have not had to answer questions like this in the past, I found it worth the challenge. I would like to point out that I am not a professional (and my advice cannot be taken as such, nor can I be held liable). With that out of the way, here’s exactly what Cindy (name changed for privacy) had to say:

Hi Corey!

I read your blog quite regularly and love it! I was wondering if you would be able to help me with my finances. I feel like I am doing okay for myself, but I am not doing anything special with my savings. It is just sitting there waiting to be put to good use. I have heard a lot about online savings accounts, but I don’t know which one to use. Also, I read your post about a Roth IRA and it sounds like a great option for me as well, but where should I start investing?…

Where to Save Your Money

Asking where to save your money is an important question to ask because it shows that you are trying to make the most of your money. It is always a great practice to be proactive. After all, as a young individual, time is on your side with investments since you are asking these questions while you are young.

To be quite honest, I have been meaning to investigate online savings accounts for some time. After reading Cindy’s question, it was the motivation or the kick in the pants that I needed to do some research. I have started making money with my blog and don’t want my money sitting without gaining interest. I plan on using it to cover some of my expenses, but I would rather it be gaining interest while it sits than do nothing. If I had to choose an online savings account, I would choose Ally. Ally offers one of the highest interest rates for online savings accounts and to be quite honest, is significantly higher than where I am keeping my savings (but not for long because I will probably change that soon).

Why I Chose Ally over Others

When it came down to my decision of what the best online savings account would be, it ultimately came down to the interest rate. The primary reason that I chose Ally Bank over others is because of the interest rate. There are no monthly fees (unless you make more than 6 transactions) and it is easy to set up. I opened an account in less than 30 minutes and was able to transfer money into my account without any trouble.

Cindy, if you are looking for a great place to put your money while you contemplate more long term investing goals, opening an account with Ally is a great place to start.


10 Responses to Reader Question: Where to Keep Your Savings?

  1. We use Ally savings accounts as well for our short-term savings. That wasn’t strictly decided based on interest rates (though they played in) but because we decided to house our primary checking account with Ally and having all the accounts under one “roof” makes for easy transfers. I was warned against using Ally by a friend but have had 0 problems with them.

    However, with interest rates being so low in general, we decided to invest some money in mutual funds and ETFs (stocks and bonds) that we had previously been keeping in cash. We have few-year time horizon on that money so it was a risky decision but so far has paid off in returns and life experience. My link above is to a post I wrote about that decision.

    This is all aside from our Roths, of course. Cindy, I think a target-date retirement account is a great place for starter investing. There are other (probably better) options as well if you’re willing to put in the time to learn the principles and do the research on the funds.

  2. Hi Corey…

    Like you I’ve been meaning to look into online savings accounts. Since I prefer to keep my money working hard for me, I tend not to keep much cash around.

    Investment choices are always each person’s individual responsibility.



  3. I also use Ally (switched from ING Direct) and have been very happy with them. Interest rates weren’t so important to me as ease of setting up accounts and moving money around. I’ve been extremely happy so far!

  4. Emily makes a good point about ‘short-term savings’. An online savings account is a good start when you may need that money soon. You may be wanting to think more long term though. You can often get better return on your money on things like mutual funds. For many people the best strategy may be a combination of both. Start building up an emergency fund in the savings account, but also try to put a certain amount away in a retirement fund. The earlier you start saving for retirement, the easier it is to build up a good nest egg.

  5. I like this approach. I also think that spreading your savings between a few different accounts. Eventually, you’ll hit the FDIC insurance limit of 250K and you’ll want to stay under that amount in any one institution.

    • No – just Ally. I’ve been really satisfied. It was really easy to open an account, transfer money from paypal. Last I checked, it had a better interest rate than ING.