Money Beagle

I had heard great things about ING Direct savings, so I was confident that we had made a good choice in choosing them to diversify our savings.  That confidence got a bigger boost when I found that they have created a “We, The Savers” pledge, which is a 10 point plan as drafted by their CEO of savings, that if people followed it, would provide financial independence.

Here are the ten points:

1. We will spend less than we earn. Saving a little out of every dollar we bring home is the foundation of independence. Without it, we can’t build equity in our home, we can’t invest for the future, and we can’t be ready for challenging times. We promise to pay ourselves first, always.
2. We will use our home as a savings account. Besides shelter and comfort for our family, the role of a house in our financial life is to build equity. We will have a healthy down payment when we buy. We’ll choose the mortgage that lets us pay down the principal fastest. And then we’ll leave that equity safe where it is instead of spending it on things that don’t last.
3. We will take care of our money. It’s not enough to have money in a bank. We will put it where it will grow. We’ll keep track of it. And we’ll check every account we have every year to protect ourselves against fraud or escheatment.
4. We will defend our credit worthiness. Good credit is going to be precious in the years to come. We will pay our bills on time. We’ll borrow only when we need to and in amounts we can comfortably pay back. And then we’ll do just that.
5. We will ignore unsolicited credit card marketing. We decide when we need a credit card, not some marketer. And mostly, we probably don’t need another one at all. We won’t even open those solicitations. We’ll shred them.
6. We will know the cost of borrowing. The interest lenders charge us is real money, too. When we buy a mortgage or finance a purchase, we’ll figure out what that interest is really going to cost in dollars, add it to the purchase price, and ask ourselves if it’s still worth it.
7. We will invest for the long term. Futures are built out of patience and prudence, not luck. We will not put off being a saver because we think there’s a lottery win in our future, in Vegas or on Wall Street.
8. We will take care of the things we have. We work hard for our money, and it’s disrespectful to waste it – or the planet – by treating our possessions as disposable.
9. We will remember what matters. We are not the things we own. If we have to spend and spend on bigger, more impressive things to keep up with our friends, then they are not our friends at all.
10. We will be heard. Our representatives in government and the corporations we deal with need to know that we are paying attention. If we’re silent, we’re accepting the status quo, and the business practices that got our country into this situation will continue. We are not going to accept that.

These are great points, and I urge everybody to read them often, because they hold a lot of truth.  Thanks to ING Direct!

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We opened an ING Direct Orange Savings Account this past week, after getting nervous about our main savings account.  For years, I have been using a GMAC Demand Notes account for holding onto non-investment money.  This includes such things as:

• Emergency fund
• Savings for next car
• Big-ticket household purchases
• Escrow account for paying our property taxes

This has, at times, grown to be a decent chunk of change.  The benefit of the GMAC Demand Notes account is that it pays a fantastic interest rate, currently at 5.25%.  It is available to employees and family members of GM, GMAC, etc. so I’ve had it for many years, as my dad is a former GM employee.

The downside is that it is not FDIC insured.  It is an unsecured obligation, so if anything were to ever happen, the normal safety cushion of the FDIC limits do not apply.  In other words, we could be out every last penny.

I still think that the chances of this happening are pretty low at the moment, especially with the government providing $25 billion in loans to the domestic automakers.  Still, the nervousness has been growing, and my wife and I have decided to diversify.  We opened up the ING account last week, and have set up transfers between it and our normal checking account.  The process, as promised, was very easy and straightforward.

The ING account is currently paying 3%, so there is a significant difference, but I think it’s worth the piece of mind of knowing that we have ’safe money’, especially these days.  We’ll still keep money in the GMAC Demand Notes account, but I’m not sure what the split will be.

I’m also thinking of improving the rate of return on the ING account by buying into some of their Orange CDs.  They have an automatic CD laddering program, and some of the 12 and 18 month CDs are paying 4.0% or even 4.5%.  This would be good, and from the looks of it, the program seems easy.  The biggest downfall is that we wouldn’t have immediate access to all of our money, but history has shown that it would take us a while to exhaust this, so the risk would be minimal.

It just goes to show that everything is evolving and changing, and can be affected by the world around us.  In this case, it’s our risk tolerance level.

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