Do we have a financial guru in the house? I want to start saving money for future big purchases. For example, I want to buy a new (or new to me) car in the next couple of years...so instead of paying the loan company, I figured I would start making payments to myself right now. Then - in a few years - I could pay cash for the car I wanted.

With that in mind, I'm interested in opening up a High Interest Savings Account and have a few questions.

1. Compounding Interest - do you want daily, monthly, quarterly??? and why?

2. Do I want a savings or a money market?

3. Can I keep this completely separate from my current checking/savings account? (Most of them mention they will connect to your existing account)

4. Will these accept direct deposit from my employer?

5. Is there any other wisdom you wish to impart on me and the other Plimates?

I am no financial guru but from what I know...

1.
The best would be an account that compounds daily. The reason being that the interest is added to your account that day. The interest grows much faster than if it were done weekly, monthly, or annually.

2.
This depends on how secure you feel with a money market account. Money markets usually have a higher interest return 1%-6% vs. 0.1%-3% for savings. Money Market accounts are also not FDIC insured. Money Market accounts however are usually quite secure.

3.
Yes you can, you can open a money market account at any bank that is not your current bank if you like. Some banks require only $500 to open a money market account where there are some that require $1000, $10,000 or even $50,000 to open. Call around to see what some of the bank requirements are in your area.

4. Many do.

5. Talk with an actual financial planner and not just some idiot on the internet about your finances. ;)

Yea, I've tried to contact my normal Financial Planner, but he's difficult to get in touch with....and my father-in-law uses him, so my wife will not entertain the option of changing....

I'd love to do some research on it for you. Give me the account number and the name of the bank after you open it and I'll see what I can do.

No, no. No need for thanks. I'm happy to do it.

What a pal, Tom! I knew I could count on you.


(Will it help if I sent you the ATM card w/ PIN?)

No, I already got that.

[/hijack]

Check out Bankrate.com

I recently refinanced a second and used this site for research. It has a lot of info and some cool tools/calculators.

Good for you for starting a savings plan!

There can be advantages to "linking" the accounts. You may be entitled to a better interest rate.

Also, once you get $X dollars saved up, consider putting the funds into a CD. The interest rates are higher than a money market, though you can't withdraw the $ during the CD's duration without penalty. Some of the banks are offering pretty competitive interest rates on their short term (6, 8, 9 month) CDs now.

Won't let me quote :/

If you can find a savings plan that compounds daily that's ideal but the yield is more important ultimately. So if the monthly or annual yield is higher on a savings plan that compounds less often go for it.

There are a lot of online savings plans (ING direct, HFSB) with high yields. You can set up a direct deposit or an automatic transfer from your brick and mortar bank.

Money markets are ok and some do have higher yields so check them.