Marketwatch - Time for Fed to Help Savers

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Irwin Kellner, the Chief Economist or Marketwatch came out with an article today parroting what we've been saying for the last year: the Fed is punishing savers to the benefit of borrowers. The mainstream press has sporadically written articles about this but it's good to see it continuing to get attention.

Irwin Kellner, the Chief Economist or Marketwatch came out with an article today parroting what we've been saying for the last year: the Fed is punishing savers to the benefit of borrowers. The mainstream press has sporadically written articles about this but it's good to see it continuing to get attention.

In his article he writes:

"It can't come a moment too soon for the silent majority -- the nation's savers.

In its efforts to shore up the banking system, the Fed has neglected the needs of those who save. And in case you did not know it, savers make up the bulk of the population."

But are savers the silent majority? When you add up everone who has a mortgage, credit card, car payment, home equity loan, business loan, etc. I find it hard to believe that there are more savers. We run on a credit economy, not a saver's economy. That's why the outcry over low interest rates hasn't been louder. There are a lot of people who have debt or use credit and they are all benefitting in the current environment.

I know that I am. I'm a saver but I also benefitted from low rates by refinancing my mortgage.

The other question to ask is, did the Fed have any choice? Shouldn't credit be less expensive in a financial meltdown? After all, it makes no sense to raise interest rates while the economy is crumbling. The Fed is not going to keep rates at 5%. Of course rates were going to come down.

But that doesn't make it an easy pill for those loving on a fixed-income to swallow.

What can a saver do? Get smart. Look for the very best places to put money. Don't let money sit in a savings account earning 0.5% when banks are offering 1.5%. Look for the very best CD rates.  Shop around. 

If all the talk about inflation is correct, then savers may soon see their fortunes reversed, as rates climb quickly.


Opening A Savings Account to Use As An Emergency Fund

Opening A Savings Account to Use As An Emergency Fund

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An emergency fund is a great way to help yourself stay out of debt. But what can you do in this economy to save money for your emergency fund?

An emergency fund is an ideal way to keep yourself out of debt. Many times, people use their credit cards when an emergency arises and then they continue to use them until they can barely make the minimum payments. As a result, they go deeper and deeper into debt simply because they used their credit card for an emergency. Here are some strategies for building your emergency fund and staying out of debt.

Start Now
The best way to start building an emergency fund is to start right away. You don’t have to wait until you get a windfall of money to begin an emergency fund. You can start just by taking a sandwich to work every day instead of going out to lunch all the time. You could save $20 or $30 each week by doing that and putting that money into your emergency fund. At the end of the month, you could have more than $100 in the fun. That’s enough to cover some emergencies even without a credit card!

Make Some Cuts
There are always things you can cut out from your budget to save money. Do you really need all those movie channels? Do you have to buy the DVD of a movie when it comes out instead of renting it? Do you have to go to Starbucks every day before work? Take a look at your spending habits and the luxuries you pay for and see what you can cut out and put towards your emergency fund. You might even find out that you don’t even miss those things after a couple weeks.

Keep Your $5 Bills
You have probably heard of Bank of America’s Keep the Change program. This concept uses the same idea but on a larger scale. When you use cash, keep any $5 bills that you have. When you get change at the gas station or wherever, take any $5 bills and set them aside for your emergency fund. Or, if you can afford it, do $10 bills instead. You will be amazed at how much you will save in just a couple months.

Set Aside Half of All Extra Money
If you get a bonus or some extra money for whatever reason, but at least half of it aside for your emergency fund. After all, this is money you didn’t plan on having in the first place so it should be no sacrifice using it for your emergency fund.

Saving for an emergency fund may give you less spending money in the immediate future, but it will save you hundreds or even thousands of dollars in interest in the long run. Instead of paying for your emergency with a credit card along with all the interest that accrues, you can simply pay for the situation with cash and be done with it for good. It’s a good financial habit to get into, but it takes some work and motivation to get started.


Etrade Complete Savings Accounts Being Sold to Discover

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Etrade sent an email today that notified its Complete Savings customers that their accounts were going to be converted to Discover Online savings accounts in March.

Etrade sent an email today that notified its Complete Savings customers that their accounts were going to be converted to Discover Online savings accounts in March.

In many ways this is no suprise. Etrade took severe losses from its foray into banking and mortgages and now appears to be trying to get back to its founding purpose - serving as an online brokerage. In recent months, it has reduced its Compete Savings rate to .50% APY, which is uncompetitive in the online savings account space.

Discover Bank has long had competitive rates. It's online savings account is paying 1.35% APY, which is okay compared to the top savings rates. Tne online bank's Achilles heal has been its service and online banking functionality. There are a litancy of complaints on Discover's BestCashCow page about the service. The good news is that the bank seems to be listening and is getting ready to roll-out a totally redone online banking platform. I've received a sneak-peak and it will singificantly upgrade the experience and remove many existing frustrations.

For Etrade customers  this is a win. They will reveive a better rate and hopefully a better online banking experience.