I received an email this weekend asking about good places to have financial accounts, as the emailer was not sure what investment companies were good, bad or ugly. So I wanted to write out this list about where we keep our money for various things like retirement, emergency funds, etc and hope it answers some of his questions.
Though a lot of people have a big problem with Bank of America, we have been with them for years and have not (knock on wood) had any issues yet. We have our checking accounts and our measly savings account with them, and we do all of our online banking and bill paying through their site as well. The advantage to being with a big national bank is that there are ATM’s everywhere in this country that we do not have to pay fees to use. The disadvantage is that it is sometimes difficult to get customer service to answer a phone call. I am sure that if we lived in a small town we would use a local bank where they might know our name, but while we are in this giant metropolis we will stay with Bank of America. One thing I do like about them is that I can see all my accounts, from credit cards to frequent flier miles, on their site through the My Accounts tab. Makes keeping track of everything a lot easier. Also, their Keep the Change program has definitely helped us save a few extra bucks.
We hold our retirement accounts at TRowePrice and have never had a problem with them either. I started some of these accounts a long time ago, and the reason I went with them was that you could open any account, from a mutual fund to an IRA, for just $50 per month on their Automatic Asset Builder program. So for someone that does not have a lot of money to put into these accounts at first, this program enables you to get into mutual fund/retirement investing without the large initial deposit that most brokerages require. As long as you put $50 in automatically every month, you can open any account you want with them. And their customer service is great, too.
We hold our emergency funds at ING Direct. Though there are a few online banks that pay a little bit more interest, we have found ING to have great customer service and a very easy to use website, and it is just not worth moving our accounts over to another bank right now. Money transfers take a few days, but earning 4.5% instead of the 1% or so at BofA makes us a lot more money. Plus, having the money somewhere where you can’t get to it asap stops you from spending it for anything other than a true emergency. Also, if you are NOT in debt, you can store the money from a 0% balance transfer there and actually make money from your credit cards. If you don’t have an account there but wish to open one, contact me and I will give you a referral code for a $25 bonus into your account. I get $10 for referring you and you get $25; it’s a win-win and it’s free money!
We hold our vacation fund at ING as well, in a separate account than our emergency fund. Sure, we might be losing a few pennies in interest every month because the accounts are not combined, but keeping some extra money available for vacations is worth it to us. Every once in a while I transfer a hunk of money into this account for when the day comes when we want to take a vacation. This way, we don’t have to go into debt to go away! Even just $25 a month can give you one long weekend away, “free” of charge as you have already put the money away.
Though we only have a few of them, our mutual funds are held at TRowePrice as well as our retirement IRA’s. Again, ease of use, low start up costs and great customer service is why we have our money there. Plus, their funds (at least the ones I have) have done very well for us over the years and the management fees are very reasonable.
DRIP Stock account
Because a relative of mine worked for a big bank many years ago, and that bank has traded up and up to be bought by BofA, I have a substantial account held by Computershare of BofA stock. (Yet another reason I bank with them; I guess if I own a percentage of the company I should use them, no?) So this account sits there, reinvesting its dividends in more and more shares of BofA. Sure, if the bank collapsed we would lose a lot, but this is what I consider a gift and not anything I put away, and the last several years has been very good to us with this stock. Besides, once a year we sell some shares and move the money elsewhere so we don’t feel like we have so much tied up in one stock. But seeing what this stock has become since my relative had shares 50 years ago in whatever bank it was back then is a reminder of what stocks can do over the long run.
“Play” stock account
My play money is over at Scottrade because trades are only $7. There are no account minimums and no account fees, so it makes sense to have it as a place where I don’t do much trading. While I used to play more with individual stocks, I got burned badly in the dotcom crash so now I just use a little extra play money to buy and sell stocks here, while trusting the mutual fund managers to do better with my real money. You can see the individual stocks I own in my sidebar near the top, and these usually change about once or twice a year. But this group I have now, except for the satellite radio company, have done well lately and don’t think I will be selling any of them. I might pick up one or 2 new ones this year, but like I said, I let the big guys play with my real money.
Extra places we put some cash away
While the above are the places we have most of our money, we also have money stashed at various other places, whether by choice, inheritance or otherwise. We have money in a California tax exempt bond fund (inheritance), a credit union from my hometown (parent used to work for the head company), some at Putnam (inheritance), insurance policies, a paid-for car, and some in the change jar in our office. It is also a good idea to keep some money at home in case something happens (power outage, earthquake, etc) and your bank’s ATM’s don’t work, so we keep some here at home too.
You should be sure to diversify your money not only in the investments you make, but also the locations where you keep it as well. I was told a long time ago by my grandfather to never keep all your money in one place…one bad move by some idiot can make it all disappear. So while putting all of our cash in one account could hypothetically make us more interest per year, I feel better knowing that my money is not all with one company, just waiting for that idiot to make his move.
I hope this post gives that emailer a few ideas as to where to keep his money; where do you keep YOUR money?