May 2008
Maximum safety
If preserving your savings is paramount, Loretta Nolan, a financial planner in Old Greenwich, Conn., suggests a plain old
FDIC-insured savings or money-market account. Just bear in mind that you'll have to keep the account total under $100,000
(still the max the FDIC will insure per depositor in nonretirement accounts) or spread your savings among several institutions.
To find the best deal, compare yields on Web sites like www.Bankrate.com with those you can get at local banks. In March, for example, we found a money-market account that paid 4.25 percent at Flagstar Bank in Troy, Mich.
Money-market accounts typically set limits on the number of transactions you can make each month and also have a minimum balance requirement (although there is none at Flagstar).
If you want to avoid those restrictions, choose a regular savings account instead. Our online search turned up yields of 4.02 percent at E-Trade and 3.60 percent at EmigrantDirect. You can open an account online by transferring money from your checking account. Have your account number and the bank's routing number handy (you'll find them on your checks).
Another safe, bank-based option would be FDIC-insured certificates of deposit. Their returns have lagged behind those of the best savings and money-market accounts lately, but they do allow you to lock in a rate that won't fall further. Six-month and one-year CDs were both paying around 3.1 percent in March.
You might be able to earn a tad more interest if you buy your CDs through a brokerage firm. Just make sure they still carry FDIC protection. For example, Charles Schwab was selling one-year CDs that paid 3.60 percent in March.
To find the best deal, compare yields on Web sites like www.Bankrate.com with those you can get at local banks. In March, for example, we found a money-market account that paid 4.25 percent at Flagstar Bank in Troy, Mich.
Money-market accounts typically set limits on the number of transactions you can make each month and also have a minimum balance requirement (although there is none at Flagstar).
If you want to avoid those restrictions, choose a regular savings account instead. Our online search turned up yields of 4.02 percent at E-Trade and 3.60 percent at EmigrantDirect. You can open an account online by transferring money from your checking account. Have your account number and the bank's routing number handy (you'll find them on your checks).
Another safe, bank-based option would be FDIC-insured certificates of deposit. Their returns have lagged behind those of the best savings and money-market accounts lately, but they do allow you to lock in a rate that won't fall further. Six-month and one-year CDs were both paying around 3.1 percent in March.
You might be able to earn a tad more interest if you buy your CDs through a brokerage firm. Just make sure they still carry FDIC protection. For example, Charles Schwab was selling one-year CDs that paid 3.60 percent in March.
