Wednesday, March 19, 2008

Mo' Money

I was recently lamenting the dwindling interest rate paid to me by my once-lucrative ING savings account. I opened it in 2002 when the Fed was slashing rates to stave off a recession. It paid a whopping 2.4% interest or so. In the intervening years, the rate has climbed as high as 5%. But in recent months, since the Fed has once again begun to cut rates, and at a much faster pace, I've been watching my monthly interest earnings shrink. It's frustrating and I don't like it. And, being young, it hasn't escaped me that others are in a much bigger pickle as a result of what I consider reprehensibly lax market regulation and bad monetary policy. Like old folks on fixed incomes who rely on the interest income to maintain their living standards. Old folks like my grandparents.

The entire time I've been responsible for saving for retirement, I've been fearful of market drops. In 2000, I had about $1500 in my 401(k). I was 23 years old. When my company went out of business, I became unable to move money into safer investment vehicles as the dotcom bubble popped. I got a check, finally, for about $450. I put that into an IRA, which today has risen to $475. In 7 years, that's all I've accrued. Another 401(k) from a job that provided matching funds has fared better, but because I opened it in 2001, it didn't gain much for several years. I wouldn't be surprised if the gains I made in the past 3 years hadn't been erased by the whipsaw action of the markets these past few months.

So, back to the savings. Being from a family that doesn't seem like it will ever recover from the psychological trauma of the Depression, I'm the type to prefer building up a significant amount of fairly liquid funds. Not on the order of the mattress or freezer, but the modern equivalent of a solid savings account. So I'm happy to report that I've come across Smartypig.com. It is designed to help individuals save towards particular goals, recruit friends and family to their cause, and match the savee with retail providers of particular goals. Best part about it? The 4.3% APR. Much better than my ING rate. I may try it out. If I do, expect a full report!

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