BASIC saving account advice

Answer: Who knows what it would take for a large bank to go under. But with so many banks out there offering money market rates of 5% or over, why take any chances going over the FDIC limit with one bank. When I checked here:

Over the course of a year 100K would earn an extra $300 interest at 5% as compared to 4.7% (100,000*0.00300). I personally wouldn't pile more than 100K at one bank to make this extra interest income, but I would move the $100K from the 4.7% account to one earning 5%+.

Andy

The only reason I would add all the $ to a single account would be to take advantage of the compound effect,

How did you do the calculation to determine how much would be earned at

Thanks!

Andy wrote:

What compound effect? If you're talking about compound interest, two accounts of $100,000 each at 5% will give you the same amount as one account of $200,000 at 5%. Google "compound interest" for lots of calculators and explanations.

$100,000 * 0.05 = $5,000. (Interest earned in one year at 5%) $100,000 * 0.047 = $4,700 (Interest earned in one year at 4.7%)

$5,000 - $4,700 = $300 (Difference)

Me, I'd go looking for two more banks that pay 5% or better and move $100,000 into each. For the most part, when a bank fails, the Feds arrange a take over by another bank. Depositors don't lose a thing. But why take a chance? There are lots of banks out there.

-- Doug

I was talking about "compound interest." I thought interest would be larger because it is being multiplied by a single larger amount rather than what would happen with 2 separate accounts.

As far as the calculations, I didn't think it was as straightforward as this; I thought other variables had to be considered, which ones I am not exactly sure of.

Thanks for all of the help/advice everyone!!!

Douglas Johns>

Hello,

In addition to your insured $100,000, you can put up to $100,000 in a close relative's names (up to as many close relatives as you have) and get the same FDIC insurance. I did it to insure my "excess" money. It is called a Totten Trust and it's optional whether you want to inform your relatives. Ask your bank.

Cheers, BB