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Saving for a Wedding Next Year

by Flexo on November 30, 2006

in Saving

Word must be getting around the office that I’m up on the current personal finance issues in the world. A coworker who I don’t normally work with came to me to ask my opinion the other day. She’s saving for her wedding, seven months from now. The soon-to-be bride, who received some money earmarked for the wedding, had heard about ING Direct and wanted my opinion.

I steered her away. Even though I keep a lot of my savings at ING Direct, I generally don’t recommend them anymore. They have great customer service to be sure, but there are better places to stash cash, offering better short term returns. I suggested two safe options. Obviously, with such a short time frame, the stock market was out.

For savings, I suggested HSBC Direct, which is currently offering a 5.05% annual percentage yield. To compare, ING Direct just increased their APY from 4.4% to 4.5%. HSBC Direct has been easy enough for me to deal with. The log-in security issues are a bit annoying, but this seems to be a trend spreading throughout all online financial accounts. Although I did not tell her this — this site is supposedly anonymous so I don’t bring attention — I maintain a list of online savings account interest rates.

I also suggested 6-month CDs. The highest APY offered on 6 month CDs, according to BankRate.com, is 5.51%. That’s significantly higher than HSBC Direct, but early withdrawals can draw penalties. I would have to know more about her financial situation to determine if she has enough emergency cash to allow her to tie up the funds for six months.

Maybe I’ll get invited to the wedding.

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Flexo, the owner and creator of Consumerism Commentary, has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow him on Twitter.

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  • F2O
    That's where my soon-to-be-wife and I are stashing our wedding funds. The savings account is a better option for us since we will be making payments to different venders over the next 9 months or so. I didn't want us raiding our other savings for wedding costs, so the liquidity of it is perfect.
    The only thing I don't like about HSBC is the time frame of their ACH transactions. It seems to take forever.
  • Tom
    You may have done her a disservice!

    While it is true that ING doesn't have the highest interest rates around, the sign-on bonuses, especially in the short term more than outweigh any lower interest offering. I believe someone within the blogging world ran the numbers and came up with an initial deposit of $4007 in order to overcome the interest rate gap. This number, though, was calculated prior to the recent rate increase. Assuming an account is opened for both the bride and the groom, the gift would have to be more than $8000 in order to have ING _not_ be the place to be.
  • Another consideration is a E-loan savings account, currently 5.50%. Though the opening minimum is $5,000, the opening process was a smooth as a babies bottom.
  • All valid points. She was depositing enough money for the wedding to make the ING Direct bonus not an issue, theoretically. The bonus is still $25 last time I checked. While she could have deposited $250, the minimum to receive the bonus, in ING and the rest elsewhere, for her, simplicty trumps the small gain.

    E-loan's rate is higher and I am sure it's a good choice. I just wouldn't recommend to a person I see almost every day a product which I have never used.

    I'll get around to opening an account there for myself, but moving my money around from bank to bank isn't at the top of my priority list at the moment. :-)
  • Tom
    Flexo - Yup, you're right on the bonus, but she would actually be in line for $60 in total. She would open an account with the $25 bonus, then refer her fiance for his $25 bonus, which would give her another $10 bonus. Just doing some quick math, even a total deposit of $15000 would still make ING a better deal. It's almost entirely because it's only for the short term. That bonus is terribly difficult to overcome!
  • You should tell them to take their cash to Vegas and bet it all on a hand of blackjack. If they win, they're destined to be together forever. :)
  • Does she have an existing non-retirement brokerage account? If simplicity is key here she could easily get over 5% in her existing account by putting some cash into one of the many money market funds offered by virtually any fund company. No bonus for signing up obviously, but if the account already exists it could be a very easy transaction. And no early withdrawal penalties like with CDs.

    I actually just posted about this on my site yesterday when I heard of the ING increase.
  • Matt
    www.savingsbonds.gov
    You could set up a free account with treasury direct and purchase 28 Day Treasury Bills at 5.25%. The rate is lower than others but interest earned on Treasury Bills is tax free at the state and local level. Treasury direct can pull the money directly from your ING account.
  • JR
    I'm using ING for my vacation savings account, because it was dead simple to set up so that both my wife and I can contribute to it from our separate checking accounts.

    As for the E-Loan savings: I've had no problem, but a LOT of people have had terrible problems with double withdrawals from their checking accounts, which in many cases depleted the accounts, causing insufficient funds fees. Check out this Fatwallet thread... I linked to a random page, but there are a lot of people very upset with E-Loan!

    In addition to the teething problems, their functionality is not very good (you can't set up repeating transfers and can't view scheduled transfers, for example). They're probably not worth the extra few percentages when there are so many other good banks.
  • Tom, I see what you are saying, but the complexity of dealing with two accounts and referring a husband is probably more work than it's worth. If the person wants to go through that work they might as well earmark $500 or whatever it is and do that to get the free $60. Then they could put the rest in the higher interest account. They'd have their cake and eat it too.

    I presume this couple isn't looking to WORK for the absolute optimal strategy. They probably just want to earn more than their current checking account. It sounds like anything over 4.0% would have been a great service to them.
  • Dan
    Another liquid account that is paying a very high rate is Citibanks E-savings it has been at 5% for a long time now. My future wife and I have this account with also a joint checking account, so when we have to write checks for wedding we just transfer from our E-savings to your check. At www.Citibankonline.com under Banking it says E-savings. It has been great!!!
  • Personally I'd have gone with the CD, but there are lots of options in the 4.5-5% range that are more than adequate. I would say it's impressive how much market penetration ING Direct has gathered for themselves.
  • Flexo, you've given great advice to your coworker. Readers here will nitpick on the small details, but I would imagine she will be far better off than had she not seeked out your wisdom.

    Have a prosperous new year.
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