After taxes, my bonus amounted to about $2,000. The funds arrived in my checking account this morning, but thanks to an automatic transfer, the entire sum has been whisked away to a savings account at ING Direct for “relocation.” This account contains the funds that should be used towards my next move, whether a down payment for a house or general moving expenses.
I contribute to the relocation fund every week, but it’s nice to throw a larger amount at that goal. Why not put that money towards debt instead? Simple. The interest I earn on that savings provides more to me after taxes than I could gain from paying off low-interest loans. The calculation is closer now that it’s unlikely I’ll qualify for a credit or deduction for my student loan interest, but savings in a high interest money market account still wins.
If interest rates go down, this scenario might change It may turn out to be beneficial to pay down the student loan interest, but I’ll still need cash on hand for when I move.
Updated June 16, 2011 and originally published March 2, 2007. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.