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Thread: Saving For That Rainy Day

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    Featured Member Destiny's Avatar
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    Default Saving For That Rainy Day

    I haven't been dancing that long, but I've finally managed to pay off most of my bills and to start saving some money.

    I read somewhere that everyone should put at least 3 months pay aside for emergencies. I'm working on that, but the bank pays next to nothing in interest on my savings. Where can I put some of my "rainy day" money where it will be reasonably safe, but earn more than at the bank? I realize that if its safe, it won't pay a lot, but there's got to be someplace where I can do better than at the bank.
    Dancing is wonderful training for girls, it's the first way you learn to guess what a man is going to do before he does it. ~Christopher Morley, Kitty Foyle

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    Default Re: Saving For That Rainy Day

    take a look at fool.com. I tend to avoid giving money advice for obvious reasons, but one thing that has never led me wrong is investing in the S&P 500. (Symbol: SPY) Good returns, but it follows the market. Go research at fool.com, it's a good place.

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    God/dess Emily's Avatar
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    Default Re: Saving For That Rainy Day

    3 months is not enough, especially in this economy and in our business.....go for 6 months, or better yet, 8. You want to be sure you're okay.

    Also, I don't think putting it in stocks is a good idea. The stock market is intended for long-term investing. You aren't supposed to get rich on your emergency fund. It should be liquid and there when you need it (which is why I don't think CDs are good either). I don't see anything wrong with money market accounts. I've got one with Netbank (netbank.com) that pays 2%.

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    God/dess Zofia's Avatar
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    Default Re: Saving For That Rainy Day

    I haven't been dancing that long, but I've finally managed to pay off most of my bills and to start saving some money.

    I read somewhere that everyone should put at least 3 months pay aside for emergencies. I'm working on that, but the bank pays next to nothing in interest on my savings. Where can I put some of my "rainy day" money where it will be reasonably safe, but earn more than at the bank? I realize that if its safe, it won't pay a lot, but there's got to be someplace where I can do better than at the bank.
    The general rule is six months. As Emily says, eight months may be better. For your rainy day fund, a money market account or savings account is best. You won't get rich, or even keep up with inflation, but it's available without penalty and that's the point.

    PLease do not use the stock market for your emergency fund. The market is subject to short term and long term fluctuations. You invest only in the market for your long term goals.

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    Banned Melonie's Avatar
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    Default Re: Saving For That Rainy Day

    The scuttlebut I hear from bankers, brokers etc. is that the bond market is already backsliding, and that the stockmarkets are at best staying steady and at worst ready to drop between now and next October. Both stocks and bonds involve commissions and taxes, which can eat up a large piece of your earnings if you trade frequently or buy and resell in less than a year. Most of all, you don't want to find yourself in a position where you are forced to sell at a bad time market wise because you need cash, as this could easily cause you to take a 10% loss versus waiting another couple of weeks or a month till the markets are better.

    I agree that your first investment goal should be to save up about 6 months worth of earnings in a bank or money market fund. The purpose of this "piggy bank" is to cover any immediate cash needs that could pop up unexpectedly, like breaking your ankle and being unable to work, having to pay bail or fines or legal fees, the engine in your car exploding etc. The nature of a bank account or money market fund is that they expect people to be depositing and withdrawing money regularly which is why there are no charges but also why the interest rate they pay is low since you are making no guarantees that you'll leave your money untouched for a year or two or five in exchange for higher interest rates.

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    Featured Member Destiny's Avatar
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    Default Re: Saving For That Rainy Day

    Thinking about all your comments, I agree, six months is probably the minimum for my "rainy day" fund. I'm checking out some money market accounts in addition to the bank savings account. Thanks for all the advice.
    Dancing is wonderful training for girls, it's the first way you learn to guess what a man is going to do before he does it. ~Christopher Morley, Kitty Foyle

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    Member badkitty's Avatar
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    Default Re: Saving For That Rainy Day

    hey i don't know if they have it over in america but i am with ING direct and they pay around 4.75% pa. its variable but its also the same level for you know however much money you have in there. the interest is always higher than other banks over here (in aus) at any rate. No fixed term etc etc. NO BANK FEES!!!YAY!!! i find its perfect for stashing away my rainy day egg.
    www.ingdirect.com

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    Banned Melonie's Avatar
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    Default Re: Saving For That Rainy Day

    just a note on different currencies and different interest rates. If you live in Australia, earning 4.75% on Australian dollar accounts works out fine. But if you live somewhere else, such that you must exchange currencies, you may actually lose more than 5% in exchange rate differences between the time you deposit in a high interest rate foreign currency account and the time you withdraw. offers lots of high interest rate options in lots of foreign currencies, however they all involve this exchange rate risk that a year down the road you'll have collected 5% interest on the foreign currency account but you'll lose 10% exchanging them back into US dollars..

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    Default Re: Saving For That Rainy Day

    just a note on different currencies and different interest rates. If you live in Australia, earning 4.75% on Australian dollar accounts works out fine. But if you live somewhere else, such that you must exchange currencies, you may actually lose more than 5% in exchange rate differences between the time you deposit in a high interest rate foreign currency account and the time you withdraw. http://www.everbank.com offers lots of high interest rate options in lots of foreign currencies, however they all involve this exchange rate risk that a year down the road you'll have collected 5% interest on the foreign currency account but you'll lose 10% exchanging them back into US dollars..

    ??? ??? What about the other way around? Would I, as an Australian, do better if I had my money in foreign currency? ??? ???

    US Dollars, UK Pounds and Euros are all worth more converted into Australian dollars than the other way around (consistently). Would I do well to invest in those three currencies since my currency (AUD) isn't worth more than any of them... ever? ???

    For example, HSBC "Multi Currency Account" ( http://www.hsbc.com.au/personal/accounts/mca.html )
    or would I be better off with one or two separate "Foreign Currency Accounts" ( http://www.hsbc.com.au/personal/accounts/fca.html )

    At the moment, my "rainy day fund" is with ING Direct "Savings Maximiser". I'm aiming to have min. $7,397 AUD aside yet ultimately $13,416 AUD.

    Anyone got any opinions they would like to share? ???




    enter: E3167322D9 for your 10% discount

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    Default Re: Saving For That Rainy Day

    Destiny, if you haven't already, I would highly recommend putting aside the money for 8 months but playing the stock market too, since it sounds like you're looking to invest if the banks interest doesn't cut it. But, kind of like melonie said, when the market is good. There are a lot of books out there on playing and understanding the market. My dad swears on them.
    If you think school is hard, try being stupid.

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    God/dess montythegeek's Avatar
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    Default Re: Saving For That Rainy Day

    Another darn agree with Melonie post.
    V, it is not the absolute value of one country versus another but what you end up with after it goes a to b and back to a and gets spent. If you have 5% inflation and we have 2%, most of the time you put money at the higher rate higher inflation rate you end up losing it to the exchange rate changing. No guarantees but on average. The shorter the time frame the greater the chance something adverse happening on the exchange rate, like local bad news.

    $10000 us dollars put in Canada or the Euro a year ago would now look like a great move for an american. A year from now it may be a push but who knows what the elections will do in either country or Eurozone expansion will do there. By adding currency risk you are adding risk, flat out risk. On average not a good thing.

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    Default Re: Saving For That Rainy Day

    AussieV, the particular exchange rate numbers today don't matter. The Aussie Dollar may be worth X US dollars or Y Mexican Pesos or Z Japanese Yen. What matters is which direction the exchange rate is moving. If the Aussie Dollar is worth more US dollars or more Mexican Pesos or more Japanese Yen tomorrow than it was today then you're better off staying in Aussie Dollars. However, if the Aussie Dollar is worth less tomorrow, you would have been better off owning a different currency instead because when you convert back, it will translate into MORE Aussie Dollars.

    From what little I know about the basis for Aussie Dollar's exchange rate, as long as the price of gold is rising (Aussie and Canadian Dollar are so-called "commodity based" currencies) you might as well hang on to your Aussie Dollars.

    Geek, you're certainly correct about Euros looking very bright compared to the US greenback. My swiss account is in Euros, and I made most of my deposits when the exchange rate was 0.91 US$ per Euro. A year later the exchange rate has moved to 1.17 UD$ per Euro, resulting in about a 25% "effective interest rate" on my swiss bank account. The only problem now is knowing when to switch back to US$ to avoid quickly losing what I have gained.

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    God/dess montythegeek's Avatar
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    Default Re: Saving For That Rainy Day

    Unless you want to play the noise, the big gains are behind the euro in % terms. Note does not imply a reversal much below $1.15 likely. So I'd take some of the money off the table on strength.
    Advantage to Euro, 75 basis pt higher rates.
    Disadvantage to Euro, too many politicians, absorption of new memebers, and fiscal policy and monetary policy working against each other.
    The US is primed, based on time since dollar weakened and both fiscal and monetary policy in go, to regain some lost world market share. Some not all, keeping a minor lid on relative Euro-zone economic performance and US trade deficit which is expanding slower and getting more Asia-focussed and less Euro-focussed.
    Noise will be near-term important because export drop in August was mostly aircraft and expected volatiles. Q3 exports will show a double digit gain on GDP basis, so the export engine is starting to rev.
    The US job engine is starting to fire, but next month could see a slip in delta on jobs. I would not bet on a strong dollar, but I would bet on much slower gains in the Euro and periods of weakening of more than a few days over the high.

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