Personal Finance Blog by Money Ning

What Baby Sara Taught Me About Personal Finance

MoneyNing — Mon, 15 Mar 2010 12:00:13 +0000

I knew baby Sara was smart, but when she started teaching me personal finance concepts…

Many of the kids and money articles discuss how we can teach our children money matters, but let’s turn the table this time. Since baby Sara’s birth a week ago, she already reminded me of many principles that you and I can both benefit from. Here they are.

When Sara first started breastfeeding, she still needed to learn how to properly open her mouth to take her milk. She was frustrated because she was hungry, but she needed to learn how to get her nutrients first. You can’t be impatient, everything starts off slow. When was the last time you were frustrated because your retirement account was small and you know you needed much more money? Thinking about giving up? Don’t. Imagine the consequences if baby Sara gave up just because she couldn’t eat.
Once she struggled through and began sucking, it was smooth sailing. We wanted her to take more at each feeding, because we didn’t want her to be hungry while she learned next time around. However, the doctor said that her stomach is tiny, and our plan just wouldn’t work. Everything takes time. You can’t expect your investment portfolio to come back in a year after it drops 40 – 50%. It will, but not right away. Have trust.
For a few feedings, we wanted Sara to have more milk and fed her with a syringe the nurses gave us. It worked wonders, but we noticed that the more we used the syringe, the worst she got. In effect, we were helping her practice waiting for food to come to her instead of going after it. Practice doesn’t make perfect. Practice only forms a habit. Do you have your finances on auto pilot? Perhaps it’s time to look at whether it’s still the most appropriate strategy for you.
You are never going to know what your reaction would be until the moment arrives. When we went to a baby class, about half the moms wanted to give an all natural birth. In order words, no medication or epidural. When we asked the instructor how many people took an epidural once they got to the hospital, she said 97% did. You can claim to have high tolerance for volatility all you want, but until you experience a crash, you are just guessing. That’s why you should start small and get used to the fluctuations before you fully commit to a new investment. Take the time to learn. Again, be patient.
When the situation isn’t ideal, you must realize that you were a big part of why it is the way it is. If we taught Sara to wait for food, we can’t complain when she doesn’t cooperate. With our finances, we are often the one to blame. No one cares about our money more than we do. If you only have one dollar, you can either spend it now or later. There’s no way around this. Take responsibility.
Learning beforehand is important. Those baby classes were extremely useful. It helped guide us in the right direction, but more importantly, it helped us stay claim in the moment when most others would panic. How many of you established an emergency fund because you read sites like this one? You may not appreciate it now, but you will when the time comes.
You can adapt. Studies have shown that while most people worry about their retirement, less actually run out of money. If you are late in saving for retirement, start now, but don’t worry. You will adapt. Baby Sara wakes up during the middle of the night, so we will just sleep whenever she sleeps. It’s really no big deal.
Things get easier as you learn and gain experience. Sara is 8 days old, and we are better already. We do everything more efficiently, and actually, so does Sara. Everything, including money matters, always seem overwhelming at first. Stay the course, and you will learn and figure it out. I know you can do it, and so does Sara.

Just keep doing the right things, and you will be able to sleep at night!

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Baby Sara Pics!

MoneyNing — Sun, 14 Mar 2010 17:38:32 +0000

Sorry for such a quick note the other day, but it’s been pretty busy times lately. Many wondered, and many more asked about them, so here are baby Sara’s pictures! Say Cheese!

Baby Sara can’t wait to write to you. (Hmm, maybe a little early, but it never hurts to plan ahead you know…)

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Budgeting to Save Money on Bills

Guest Contributor — Sat, 13 Mar 2010 13:00:38 +0000

They turn up in the mailbox every month, demanding your attention and your money. If you want to save money on bills you need to approach the problem in two ways. The first thing is to cut services you don’t need and the second is to find ways to get the things you need, cheaply.

How to Trim Essentials Bills

Food, power and shelter are all essentials. Each can be trimmed, but that ability is heavily dependent upon some factors. For example, to trim shelter costs you can move from a large home to a smaller home, or even to an apartment. This may or may not be realistic. Taking in a college student as a tenant can help defray housing costs as well, but carries some risks.

Power costs relate to what you pay on gas and electricity and in some areas water as well.
Weatherproofing helps reduce waste and energy lost from the windows and doors.
Redoing your landscaping with a focus on drought resistant plants and smaller plots of grass will save you money.
Changing to compact florescent bulbs and setting the thermostat lower in winter will save on gas and electricity.
A sweatshirt is cheaper than heating a whole house to 67°.

Food is one of those areas where relatively large cuts can be made with little effort. You don’t have to survive on Ramen noodles either.

Ground turkey and beef provide plenty of good protein, as do eggs, and they cost a lot less than large cuts of meat.
Plan your menu around the circulars for the week and cash in on the discounts.
Clip coupons from your paper and find them online to save the most possible.

Luxuries

I know that we don’t really think of cable and Internet as luxuries any more, but they really are. Do you really need the level of service you currently have? I shut off my cable service nearly two years ago and we haven’t really missed it.

I don’t use the highest level of DSL, rather I settle for a slower speed that is still plenty fast since I don’t game online. Between the two items I save nearly $100 a month.

Editor’s Note: I am paying for the slowest service, and my whole business runs online. Before you think you need to download the latest security patches in a millisecond or else your lifestyle will somehow be affected, think carefully about how much money you are actually wasting by helping broadband providers prosper.

Pedicures, manicures, fancy haircuts and gym memberships are all luxuries too. If you are in the professional world and feel that you must have the manicure and haircut, check out a local esthetician school; you can get the same services performed by supervised students at a fraction of the cost.

Cell phones are also luxuries, believe it or not. If you carry it for anything other than emergency calls, you are spending more than needed. Now, some of us use a cell phone exclusively, having abandoned the land line. In that case you need more than basic service, but shop around and find a plan that meets your usage profile, don’t try to fit your profile into a specific package.

Saving money on your bills is all a matter of viewing them in a new light. Be creative, re-prioritize your spending and watch your bank balance grow.

Like these simple tips? Check out the How to Save Money on Everything ebook. It’s yours free when you subscribe to the free frugal newsletter.

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What is the Ideal Investment Mix? – Money Mailbox

MoneyNing — Fri, 12 Mar 2010 13:00:23 +0000

A few weeks ago, I started asking readers to submit their money questions in case they wanted a second opinion on their dilemma. If you have a question you would like answered, you can just contact me.

My name is Ken and I am turning 23, single. This year, I felt that I had to diversify my investments. I plan (and have already started) to diversify my finances to many types of savings/investments such as savings, time deposits, stocks, mutual funds, UITF, forex, etc., as well as a personal savings and emergency fund. Although I’m not planning to retire yet, I plan to invest in long-term, 1-5 years investment products. Do you think this is a good idea, considering that I’m completely debt free? Or do you think I have gone overboard in my investment strategy?

Investing is always a good idea, especially for someone with no debt. From the terms you use to describe your investments (time deposits instead of CDs, and UITF, a mutual fund like investment available in the Philippines), I assume you are foreign. The good news is that investment strategies are more to do with you instead of where you are currently living.

Diversification

First off, I believe your investments are spread out too thin. I say that not because I think you are over diversified, but because I believe most non-professionals don’t have the time to track so many investments. Most people buy different mutual funds, only to find that the funds they own are invested in similar stocks. With your own stocks, mutual funds and UITF in the same portfolio, it’s unnecessarily time consuming to dissect everything to see if you are diversified properly. Diversification comes from buying different asset classes to smooth out volatility, not necessarily where you bought the assets from.

Emergency Fund

You are 23, and your whole life is ahead of you. Since you have no debt, I would be more aggressive with your investments, as well as having a less than usual emergency fund. Most people recommend 6 months worth of living expenses, and that is good advice. But for someone like you, I would put less in liquid savings (3 months ought to do it) as long as you have a stable job because someone young like you can probably cut down your expenses drastically and live like a college student if you are forced to down the road.

With less liquid savings, there’s more to invest for the long run. You can cash out your investments if you have to as well. Some people may frown on this advice, because having to withdrawal in a down market is really bad, but at your young age, I believe it is a risk worth taking.

Investment Mix

There’s no standard answer to this. With your age, you can even be extremely aggressive and invest in a 95% / 5%, equity / liquid savings portfolio to start with because you have time to make your money back if the stock markets were to tank. Also, while the ratio is a good place to start, you need to be adjusting this as you age during the next decade of your life as you will:

age
have different priorities (ex. want to purchase a home).
have increased obligations (ex. perhaps a family to take care of).

Forex

Though I know many people who own foreign currencies, I’m not a big fan because most of those people just own them and have the cash in a savings account earning no interest at all. Over here in the US, we can invest in foreign investments like the Brazilian stock market index through an ETF such as the iShares MSCI Brazil Index (symbol: EWZ). Doing this is better because you are not just getting exposure to the Brazil real, but also to have it invested in the Brazilian economy. In my opinion, it’s a much better long term play. So, instead of buying the currency, why not buy its stock market index instead?

If you own forex because you trade currencies frequently, then it’s a different ball game all together. Be aware of the leverage that these investment accounts give you, because you can loose quite a bit of money VERY quickly.

Investment Horizon

You mentioned investing for the long term, but you followed that statement with a 1-5 year period. When we are young, it’s easy to think of 5 years as a very long time, but know that you might be living for the next 80 years, which is the time frame you need to plan for. Look to win battles, but don’t forget the war too.

Lastly, Don’t Forget that Everything Changes with Time

Though I said a 95% equity investment may be for you, whether it’s the right approach to take will depend on at least your job, your tolerance, your net worth and your spending habits. As your situation changes, your ideal investment mix should move with it. Don’t make the mistake of setting and forgetting. If you don’t have time to constantly look after your investments, a financial advisor is still worth the money.

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Change Your Vacation Style to Save Money

Guest Contributor — Thu, 11 Mar 2010 13:00:16 +0000

Vacations provide an escape from reality. They give us the opportunity to step outside our daily routine and relax in a new environment. One week a year we book the fanciest hotel, go to the big name restaurants, and splurge on the ultimate activities. Then, in 2009, came the staycation. With everyone watching their budgets, these luxury vacations fell by the wayside. Holidays were spent in the back yard or at the neighborhood pool. No more cruises, no more resorts.

Most people think of vacations as “all or nothing”, but there is a middle ground. A vacation does not have to be expensive. Like many other things in life, a vacation can be done on a budget, and the experience can be more valuable because of it. Though this strategy involves changing the way you think about travel, reconsidering your vacation options can open doors to new places, new adventures, and reduce your budget too. Here are some tips to help you along the way.

Improve Your Travel Habits

Reconsider Your Destination

The first step in changing your travel style is reevaluating your destinations. Mediterranean cruises, all inclusive resorts, and Disney World vacations are wonderful experiences, but often they consume an entire year’s travel budget in one or two weeks.

If you are staying in the United States, consider a national park. A year-long annual national park pass is good for the entire family in all parks in the country and costs the same as an adult one day ticket to Disney World. If you’re not the outdoor type, consider a vacation to a city known for it’s free entertainment. Washington D.C. is filled with free museums and cultural activities the whole family will enjoy.

Thinking internationally? Research your options. Money will go significantly farther in less expensive countries. If you are looking for the beach, consider a nearby international destination. Belize or Costa Rica can offer surprisingly affordable tropical experiences. If you have more time, consider a country like India, where you can travel for $30 a day. Research countries you may have otherwise overlooked and step outside your comfort zone. Syria was recently removed from the State Department’s warning list and the Syrian people are regarded as some of the friendliest you’ll meet. Travel costs are dramatically cheaper than nearby Turkey or Israel.

Plan Ahead

Like most other activities, planning your budget ahead of time will help you stay motivated to save. Consider how much you have to spend, breakdown your costs, and then monitor your expenses as you go. Websites like Budget Your Trip provide easy to use tools to estimate, plan, and track your travel costs. Stay focused as you travel and you’ll understand where your money goes.

Go Independent

Independent travel is almost always the cheapest way to go. Resources are available for independent travel at any budget. Websites like Lonely Planet cater to the backpacker crowd, while TripAdvisor provides reviews and advice for independent travelers with a higher budget. With the growing number of online resources, coordinating and planning your own trip is easy and provides the most flexibility, adventure, and cost savings.

Be Flexible

Booking in advance may be the best option in Europe or the United States, but when you travel to non-western countries you can almost always get the best deal after arrival. Bartering is still a strong component of many cultures. Once you’ve made a reservation you’re locked into your rate and there is no room for negotiation. Always consider the country and the culture you’re traveling in. In many places your room will cost a fraction of the price on arrival than it does on websites or brochures. You will also have a chance to check out the room and confirm the quality. While reservations may give you piece of mind ahead of time, flexibility will give you the best quality for the lowest price.

Reevaluate Your Hotel Choices

Ignore expensive chains and consider more independent options that will give you more bang for your buck. A five star hotel isn’t necessary when you spend your days out seeing the town. Super 8 and Motel 6 are surprisingly clean and comfortable, and they now provide wireless internet. Consider your destination and look into all of your options.

If you’re traveling internationally, independently owned hotels are often far cheaper than their American chain counterparts. Okay, so you may be too old for a backpacker’s hostel, but this doesn’t mean that all budget accommodation is off limits. In many parts of the world budget hotels can cost as little as $10 a day. In Vietnam, a mid range locally owned hotel can cost $15 to $20 a night. Pocket the cash you would have spent on a luxury hotel and put it toward entertainment, or better yet, extend your trip. You’ll appreciate your time more than you would have appreciated the 500 thread count sheets.

Change Your Mode of Transportation

The need to fly is unavoidable for many trips. Unfortunately it’s also expensive. Consider limiting your flights by taking overland transportation. If you’re traveling outside the United States, public transportation is often readily available and a cheaper alternative to flights. Check out seat61 for a thorough description of overland travel in regions all over the globe. Buses and trains often provide the best opportunities to interact with locals. They can be an adventure and an opportunity to enhance your travel and cultural experience.

Eat at Local Restaurants

Eat where the locals eat. It doesn’t matter if you’re dining in San Francisco or Beijing, the locals know where to get cheap, good food. Skip the restaurants with the fancy brochures or the large signs in English. When you walk in, glance around you and find an entree that looks interesting. If the waiter does not speak English, simply point to the dish and he’ll understand. By trusting the locals you will have the most authentic meal for the best price. You can be assured, the locals aren’t paying the tourist markup and neither will you.

Find Free Entertainment

If you’re in a large city, you’re likely to find plenty of free activities. Museums, outdoor concerts, and festivals fill many weekends in most cities during the spring and summer. Talk to locals in the area to see what they do for fun. Check out websites like Yelp to know what’s happening when you’re in town. Consider skipping the dinner cruise on the bay for a stroll through a city neighborhood and meal at a local eatery. Skip the amusement park and instead pack a picnic and head to the park. If you travel like a local you’ll experience a whole new side to a city and you’ll save cash in the process.

What You’ll Gain

Traveling on a budget doesn’t have to lower your experience. Think outside the box and you’ll transform your vacation into a true experience. In many cases, the benefits are more than simply saving a few dollars.

Interact with the Locals

If you change the focus of your trip you will open your eyes to new experiences. Traveling like a local gives you the opportunity to interact with the locals. You’ll gain first hand experience and insight into the culture around you. More often than not residents will jump at the opportunity to help you with directions or information. Many cultures are eager to show off their country and you will learn more than a tour guide could ever teach you.

Longer Trips

Prioritizing and cutting costs means that ultimately you can travel longer. Whether it’s lengthening your trip or planning a second, your dollars will buy you more if you monitor your costs and consider watch what you’re spending.

Contribute to the Local Economy

By avoiding high end chain hotels and restaurants, your experience will not only be cheaper and more authentic, it will also put more money into the local economy. Ethical tourism does not have to be your highest priority, but it’s good to know you’re giving back to the country in some way. A $5 meal at a family owned restaurant gives more than just memories; it reinvests into the community and provides local jobs for the residents. By staying at locally owned facilities you truly are becoming part of the community.

Experience Diverse Cultures

Opening your mind to destinations you may not have previously considered will allow you to experience a diversity of cultures. Changing your mindset will do more than save you money, it will allow you to step outside of your comfort zone and immerse yourself in a culture that you previously considered foreign. The experiences you gain from travel can be far more valuable than the cost or the savings.

Staycation is a good way to save money, but traveling somewhere is still, most likely, more fun. If you can keep it to a budget, why not?

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How to Use a 529 Plan to Improve College Savings

Thursday Bram — Wed, 10 Mar 2010 13:00:20 +0000

It used to be that saving for college was a relatively simple process: if you wanted to save for your child’s college education, you put money away wherever it was convenient. Now, though, there are several types of specific savings plans that offer you benefits that your old coffee can’t compare with. They may not be as convenient, but when your child is ready to start college, there will be more money available. Of these plans, a 529 plan offers some significant ways to improve on your college savings options.

Investment Plans Versus Savings Accounts

Saving for college in a savings account means that you’ll earn interest on any money you deposit. But, in the grand scheme of things, that interest won’t add up to much. 529 Savings Plans aren’t savings accounts, though, and they offer an opportunity to earn more money. They’re set up like 401(k)s or IRAs: the money you contribute to the plan is invested in mutual funds or similar investments. There is a risk, of course, that the value of those investments could go down between now and the date when your child is ready to start school, but most 529 plans do take conservative approaches to investing.

There is a second type of 529 plan that can pay off even more than an investment can. A 529 Prepaid Plan lets you pay for future college costs at today’s prices. Given the fact that the cost of college has far outpaced inflation and doesn’t look to be slowing down any time soon, taking that option could make for a pretty significant financial boost when your child is ready for school. Because 529 plans are operated by individual states, the prepaid tuition is usually set up to work with in-state schools. However, most plans do offer options for converting that money to be used at private and out-of-state colleges.

Automating Your Savings

Most 529 plans require that, in order to enroll, you have to set up an automatic monthly payment. Such a set up ensures that you’re actually contributing money to the account regularly, which isn’t true for many of other college savings options. You can, of course, contribute more with one-time payments, but having an automatic withdrawal set up makes the entire process easier. There’s an added benefit if you have a relative who wants to help contribute to the plan, as well: anyone can either make one-time payments or set up automatic withdrawals.

The Tax Benefits

Any contributions you make to a 529 plan grow tax-deferred and, as long as the money is used towards college expenses, withdrawals are tax-free. If that doesn’t make a big enough difference, many states offer additional tax benefits as well.

Not only can you create an automatic savings plan to put away money for your child’s education with a 529 plan, but you can increase that money and minimize the taxes you pay on it, all at the same time. It’s worth checking into the specifics of the plans offered in your state to find the best plan for your family.

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Should You Cash in an Annuity or Monthly Settlement Payment for a Lump Sum?

Miranda Marquit — Tue, 09 Mar 2010 13:00:50 +0000

In these financial times, many people are looking for ways to get a little more cash — usually in lump sum form. The thinking is that a lump sum could pay off debt, or cover medical bills. For those receiving some sort of settlement payment, or receiving annuity payments, it is tempting to turn to one of the companies, like J.G. Wentworth or Peachtree Financial, that offer to “buy” your annuity or settlement, giving you a lump sum.

This arrangement works when you sign over the right to receive your regular installments (which may be monthly, quarterly or at some other interval) to the company. This company then pays you a lump sum. This lump sum is usually the value of your settlement or annuity, minus a fee. And this is where things can get a little sticky. After all, companies are in business to make money. Therefore, you may pay fees of between 9% and 15% or more. These fees are deducted from the total amount you would receive. So, if you had a $50,000 settlement, and you were charged a 15% fee, you would actually only get a lump payment of $42,500. If you desperately need this money though, you might not mind, since the monthly payout of $50,000 over a period of years might not be enough to sustain you.

Another consideration is related to taxes. You will need to find out the tax implications of taking a lump sum, and what happens when you cash out your annuity. In addition to taxes, many annuities have certain surrender fees that have to be considered. You may have a $100,000 annuity, but by the time you pay fees for turning it over elsewhere, pay the surrender penalty and fulfill your tax obligation, you might be sorely disappointed to discover that you take home less than half the annuity’s value.

But things aren’t all negative, as this arrangement can still be value in some cases. If you have a great deal of debt that could be cleared with the help of a large lump sum, it might be worth it — especially if your credit cards and other loans charge a high rate of interest. Additionally, many people use these lump sum arrangements to pay high medical bills. Having a lump sum can also be helpful in other dire financial situations. If you feel that your desperation outweighs the costs of converting a steady income stream to a lump sum, then it might be the right move.

However, it is important to weigh your options and consider your habits. If the lump sum agreement is the only thing keeping you from financial insolvency, it is a good idea to examine the habits that led you to this point. Unexpected catastrophes including medical problems and even long-term job loss could, in some cases, come from your own negligence. Building an emergency fund going forward, or taking other steps to protect against future events, may be helpful, and a large sum of money can go a long way toward getting you back on your feet.

If your problems stem from poor spending habits and large amounts of consumer debt though, it is a good idea to reform your behaviors. Otherwise, the lump sum will only provide a temporary band-aid for the problem. Your debt may be paid off, but if you have poor spending habits, you will soon find yourself in the same position again — but with no settlement payment or annuity to convert into a handy lump sum.

In the end, what you do with a monthly payment of this nature is a cost-benefit situation. You will likely keep more of your money in the long run if you continue receiving the regular payments, and they will provide at least one reliable income stream. Be sure to consider all of your options, and look at the big financial picture before you convert an annuity or settlement payment into a lump sum.

Editor’s Note: More and more, I’m starting to see the beauty of annuities, or more specifically, a consistent and dependable income. Since you already purchased the annuity, be extra cautious about why you would want to give up something so dependable. There are some rare cases, as Miranda highlighted, that make this decision worthwhile but most of the time, it’s not a good idea. Think twice.

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A Little Success Post

MoneyNing — Mon, 08 Mar 2010 13:00:39 +0000

“The measure of success isn’t if you have a tough problem, but whether it’s the same one you had last year.”– John Foster Dulles

Sometimes, a simple statement contains so much wisdom.

It’s okay to fail. In fact, fail fast.
It’s okay to have problems, but make sure you address them when they pop up.
Notice that there’s no mention of outside help. Results are important, not necessarily how exactly a problem is solved.
Efficient is good too. This is obvious, but it is not nearly as critical as actually fixing what’s wrong. Someone who can get things done with less is, in theory, more valuable; but in reality, not that many people can quantify and measure the difference.
It’s okay that the problem is tough to solve. In fact, some problems are tough by design. If every solution is trivial, we will start categorizing the easier problems tougher, because everything is relative.

But How Do You Succeed?

Let’s be honest. Some people are just more gifted. They are smarter, think more quickly, and seem more resourceful. You can’t change your naturally born talent, but you can improve by experimenting.

How do people know the answer of 1+1? Because they were told the answer ahead of time.
How do people know how to find the lowest cost? Because they have tried different ways and found the method to get that price.
How do people understand that their emotions usually wreak their investment performances? Because, in addition to being told on sites such as this one, they have lost money.

Talent is talent, but nothing beats real world experiments and experiences.

Fail Often

“If I find 10,000 ways something won’t work, I haven’t failed. I am not discouraged, because every wrong attempt discarded is another step forward” – Thomas Edison

We say failing often, but there are actually no failures in trying. Failure happens when you don’t try, because you gained nothing. When you attempt at anything, you are at least learning whether you like to try again or not. If you choose to pursue it, you already know one way that hasn’t worked.

Thomas Edison arguably invented one of the most important product of all time. He might have been smart. He might have had lots of help. He might have been blessed, and he might have been lucky. But for sure, he was determined to succeed. He never failed, because he never saw it that way.

You can succeed too.

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Sara is Here!

MoneyNing — Sun, 07 Mar 2010 18:00:05 +0000

Sara was born on March 7th at 7 lb, 7 oz! Everything’s been amazing so far and I’d love to talk to you more but I need to get to know the most wonderful girl in the whole wide world.

(We are still at the hospital, so more pictures will come later!)

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Sallie Mae Bank Review

MoneyNing — Sun, 07 Mar 2010 14:12:38 +0000

Sallie Mae Bank is yet another option for our savings, and initially, I thought the yield wasn’t high enough to justify talking about it. However, with the competition all recently dropping rates, it’s time to take a look.

The Standards Offering of Sallie Mae Bank

I don’t want to bore you with the standard fluff, as we’ve talked about online savings accounts a ton here. You know the drill: Rates that are slightly higher, online only option, easy sign up process and the like. In essence, it works.

What’s Different with Sallie Mae Bank

Though things are more of less the same, some may feel that because Sallie Mae lends money to students to fund their education, it is easier to do business with them. I mean, which would you rather: your money being used to fund other people’s car purchase, or your money going towards a quality education?

Click Here to Learn More and Sign Up for a Sallie Mae Savings Account

The Upromise Difference

Since Salle Mae also owns Upromise, they’ve decided to leverage their offerings (meaning good things for you as a customer). All you have to do is link your Upromise account with a Sallie Mae savings account and you get a 10% bonus on your Upromise earnings, calculated annually. It’s necessary to setup a monthly automatic savings program of at least $25 or have at least $5,000 in the Sallie Mae account within 90 days of opening the account, but if you have Upromise account, this seems like a no lose situation.

Aside: For those who don’t know, Upromise is a rewards program for helping you save money for college, where you can earn money for doing everyday things like going to participating restaurants and buying groceries. The best part is that you can still use your own credit card if you wish, so you get double savings. You can learn more about UPromise here

Some Caution about Sallie Mae Bank

Many may not care, but while looking through their account terms, I found something about Sallie Mae’s fund holding period that is of interest:

Your initial deposit is held for 10 business days in most cases, but could be longer if verification of the funds are required. This is common, but it gets more interesting from here.
Once your account is open, your subsequent transfers are held for five business days after your account gets credited of the funds if the amount is $5,000 or less. If the amount is $5,000 or more, they are held for 10 business days.
When you close the account, Sallie Mae Bank may place a temporary hold on your funds to allow any necessary processing procedures to be performed.

On some level, I understand that this could deter fraud. But if they wait until the funds clear from the other side, why do they have to hold your deposits for additional time? What do you think?

Also, the account closing clause is obviously to protect them in case everyone wants to close their account. But if you ever want to do this, I suggest withdrawing all your cash before you mention that you are closing your account just in case they decide to delay the process.

Is Sallie Mae Bank’s Online Savings Account Right for Me?

I’m not sure that the market needs another offering, but as a customer, competition is always welcome. If you are an Upromise user (or someone who will benefit from college savings), then having a Sallie Mae account is a no-brainer. For those who are looking for a new savings account, you may like the fact that it’s putting your money to good use, or the fact that the rate is one of the highest in the nation. It’s a solid offering, but just remember about the holding period for your deposits. While it’s not a deal-breaker in my opinion, at least know the fine print, especially if you want to close your account.

You Can Click Here to Learn More or Sign Up for an Account

Resources:

SallieMae.com – Official Site
UPromise.com – Official Site

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