Because we live below the poverty line, (see http://aspe.hhs.gov/poverty/07poverty.shtml) our four- member family is getting a huge tax refund this year, and we're looking for the best place to invest the money where it will still be liquid and available. The credit union where we do our regular banking gives only 1.49% to savings accounts with balances over $1999. We want to make a little more money on our "3-month's income emergency fund" without too much risk.
So I googled "savings interest rate" and got lots of offers around or slightly above 5%. The problem for me is that none of these banks are in my city. Are they real? The realities of identity theft are becoming more and more clear to me, and I don't want to be floating my SSN (or my refund) out to a "bank" that may be a clever ploy. How do I know the difference?
It's frustrating and just a little scary. My paypal account is currently earning 5.02%. Perhaps I should put my tax refund into paypal as long as I don't go on some crazy eBay spree.
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Wait just a minute! Or if I were German like Martin Luther...Ein minuten bitte! I read the poverty line for a 4-person family at a income of $20,650! I know for a fact that when you entered the district, starting salary was somewhere in the range of $24K and you have been around long enough to have moved well beyond that. Let's not give the inaccurate impression that you're living in a box.
My taxable income this year is only about $17,000 dollars, and to that figure is below the poverty line. Now, perhaps, as I am a capitalist pig (see "The Hot Poop"), I'm underreporting my income through the genius of tax-sheltered yadda-yadda's and tax deductions like chidren and mortgage interest and students loans. Nevertheless, to be fair, I'm not living in a box.
Commendable that you are trying to be a good steward.
I like mutual funds. The returns are WAY better than bank accounts (assuming you can ignore the apparent short term volatility... just leave it alone) and you can still withdraw without the hefty penalty of an IRRA or 401K.
Are you trying to keep the capital liquid?
You rock...
Yeah, I'm trying to keep it liquid because it's supposed to be our emergency fund in case I get laid off or whatever. 5% with no volatility is pretty attractive, but perhaps an old-fashioned mutual fund is the ticket.
OK, now we're on teh same page with this. By the taxable income/poverty line rational a person could easily live in a house they can't afford (tax break), have extraordinary student loans (another one), tithe faithfully (yet again), eat Raman and catfood, and be under the poverty line dispite having a $35-$40k salary. I think if you're going to be under the poverty line, you should have to do it the old fashion way. Clearly I'm joking, but I'm right at this "poverty line" as well and we do just fine (as I know you do). Someone seems to have a vested interest in bolstering the numbers of those listed as "under the poverty line."
Hey man...don't put it in a mutual fund...you'll lose it all in broker fees and I don't know how liquid (how easy it will be to get your money out when you need it and if there are penalties). Plus, mutual funds usually invest in stocks which are volatile. If you are looking for an emergency fund, go with a money market account (just like a checking account but with interest) with www.netbank.com or www.ing-direct.com. That's what I use. If you don't mind tying up your money for 3-6 months, a safe investment would also be a CD with one of those companies. They should offer rates around 4-5% with no risk. That's what we use for our emergency fund. By the way, experts recommend you set aside 6 months living expenses in your emergency fund if you can afford to. Seriously, feel free to ask what we do - I feel like we have a good strategy (since I have my parents to ask advice from and Stacey and I both majored in Finance, work in that industry, etc)
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