I’m sure everyone has their own system when it comes to storing their funds for short periods of time. After all you can’t invest away your emergency funds, lest you be forced to cash out (and eat capital gains) at the worst possible time. Instead I employ a few different account types and services to keep my funds properly flowing and earning interest along the way. Here’s what I got!
1. Checking: Franklin Mint
This is the first line of defense for my financial well-being. My paychecks and survey/other income is always deposited here first. Any automatic deductions each month are taken directly from this account. This doesn’t earn any interest, and so I purposely move the vast majority of my income out of here as soon as possible. I have an “emergency of emergencies” buffer of about $200, on the offchance that something unexpected gets deducted. NO ONE wants to deal with over-drafted accounts.
2. Emergency Savings: ING Direct
Every paycheck, a specified amount is deducted directly into my ING savings. The interest is modest, but still substantial. When my balance is large enough I may consider moving the money around based on interest rates, seeing as other banks do pay out more currently. I rarely if ever touch this money (my last withdrawal was for new tires).
3. Spending Money: ING Electric Orange
Rather than deduct my spending money from my Franklin Mint account and risk spilling over into funds allocated for other expenditures, I have a small amount transferred every paycheck to this account. This helps keep spending under control, as if I ever run out during a given week, I simply don’t spend anymore until it is refilled. If I ever go under, it also builds up and accumulates a small amount of interest (below 4%, but still higher than your run of the mill savings account at a brick and mortar bank).
4. Rent And Car: Paypal Money Market
Seeing as these expenditures sit in my account for the course of the month, I transfer these funds into my paypal account each paycheck. Paypal gives me a little more bang for my buck, with an interest rate over 5%. The advantages of Paypal are two fold. For one this further prevents the co-mingling of funds for other expenditures and therefor helps lessen the chance that I’ll overlap by accident and withdraw too much. Also, since I currently only have a basic account, my girlfriend and I use this to transfer money owed on various things. Rent comes to me, for example, and Car payments go to her. Sending to our Paypal accounts is instant, but I give myself a 5 day buffer if I need to get the money back into my bank account.
My long-term deposits are a post of their own, but hopefully this shines a little light on how I run my day-to-day finances!
-Xias