Since the moment there was more than one high-yield online savings account to choose from, people have been comparing these accounts based on the interest rate. When I first got a high yield savings account, it was between ING Direct at 4.75% and Emigrant Direct at 5.05%. Oh, how I miss 2006… now the rates are clawing at each other at much lower levels. But the debate still rages on…

“Why would you go with XXX Bank when YYY Bank’s rate is .50% higher! You could be getting a better return on your money!”

At first, I fell for this type of thinking, just like everyone else. I went with the slightly higher rate at Emigrant Direct. And then couldn’t get my account verified for months! The tiny amount of extra interest I would have earned was wiped out.

If you look at the number of high yield savings accounts I have now, you’d think I was still a rate-chaser. I mean, I’ve got accounts at Emigrant Direct, ING Direct (now called Capital One 360), E*TRADE Bank, Citibank, and even a SmartyPig account.

Actually, the reason I have all of these accounts is not because I’m a rate chaser. It’s because for the bulk of 2007, I was a bonus chaser. If your bank offered a bonus of $25 or more, there was a good chance I took advantage of it and opened an account! (Assuming your account was fee-free and had no minimums.) Of course, 2007 was a different time, economically, and very few banks are still offering bonuses for opening an account. Capital One 360 still has the same bonus referral system it’s had this whole time, though.

I can’t recommend that you be a bonus chaser like me. First of all, it’s much harder to do these days. Secondly, it results in a lot of open accounts. This can be a security risk if you don’t carefully monitor them all. I use Yodlee and Mint to monitor all of my accounts and make sure there’s no fraudulent activity. There’s other software and web sites you could use, too. No matter what, you’ve got to have a system for tracking your open accounts.

Why keep all of those accounts open? Why not just close the accounts that have poor customer service, or I’m not happy with for any reason? Well, I’ve never had a major problem with any of my accounts. Secondly, I use all of those open accounts to my advantage!

Savings Rebalancing

The idea of “savings rebalancing” is an extension of my Savings Snowball. I use all of the different accounts as “buckets” for my savings goals. One for my brother’s Florida wedding, one for a new car fund, one for an emergency fund… there’s a lot of them! For that reason alone, having multiple accounts is just nice. With one account for everything, I’d have to keep track of how much money was in each goal on paper. With multiple accounts, I can just set up automatic transfers out of my checking account, and I can easily see how much is in each goal.

Rebalancing comes into play when I establish a new savings goal. It actually happens more often than you would think. A few months ago I closed my “textbooks” savings when I graduated, and started my “Brother’s Wedding” and “Charity Fund” savings goals. With this big shift in goals, it was time to look at my accounts and figure out the best place for each goal.

For the goal that will have the most money in it (currently, my car fund), I picked the account that was giving the highest interest rate at the time of rebalancing (SmartyPig). For the emergency fund it was more important that the money be easily accessible than it get a high rate, so it stayed at ING direct. My charity fund took over the hole that was left in Citibank when I moved my car fund over to Citibank.

You don’t have to shift a lot of money around to rebalance. My car fund had $117 in it when I moved it from Citibank to SmartyPig. But I also had a $50 SmartyPig gift card, so there was already money in that account. That meant I only needed to move $67. But, instead of moving it from one savings account to the other, I just put $67 in SmartyPig from my checking account. That brought the balance up to what it should be, and I just counted the $67 as a contribution to my charity fund.

So what does rebalancing do for me?

• Ensures that I’m getting a high rate on the largest chunk of my savings.
• Forces me to reevaluate my savings snowball.
• Keeps me sane and out of the rate chase debate!

Savings rebalancing is best if you’ve got a real Type-A personality, which most rate-chasers do! I highly recommend it if you have several accounts open because of rate chasing. And if you don’t have one, I highly recommend an account with Capital One 360. Out of all of the accounts I have, their customer service and ease of use makes them my favorite!

I’ve been thinking of trying out SmartyPig for a while now. SmartyPig is basically an online savings account (like ING Direct or Emigrant Direct, etc.), but it has a few unique features.

First of all, you choose savings goals for your SmartyPig savings accounts. I love this, because most of us fail when we “just save” — we do a lot better if we attach particular goals to our savings. Also, if you make your goal public, friends and family can add money to your savings goal. I love this as an idea for birthday/graduation/whatever presents. I mean, I have enough stuff, but my savings goals are really important to me.

The real kicker is that they’re offering a higher interest rate on savings than most online banks right now. 3.05% APY blows all of my other accounts out of the water — they’re all hovering around 1.50%. But still, I didn’t want yet another online savings account. Most people say I have too many already — I have savings accounts at ING Direct, Emigrant Direct, E*TRADE, Citibank, and I just cancelled a low-yield one at Bank of America. Did I really want to add another one on top of that?

Well, yes, I finally did open a SmartyPig account as well. Mostly because I won a $50 SmartyPig gift card from the SmartyPig blog. I decided to use it as an opportunity to set up some new savings goals and move some money to the higher-yielding SmartyPig. I changed my Citibank account from a “new car fund” to a “charity fund,” where I’ll save up to give to my favorite charities throughout the year. Then I went to SmartyPig to reopen my “new car fund” there.

For your benefit, I documented the process of opening an account with SmartyPig below. It’s a little more complicated than some other online banks, but once you have an account open, it seems fairly simple to start multiple savings goals (just like the simple process of opening sub-accounts at ING Direct).

It is a bank account, so be prepared to give up the following information to open an account:

• Full name
• Date of birth
• Social Security Number
• Address, and previous address if you’ve moved within 2 years
• Driver’s License (or State ID) Number
• Five security questions and answers to identify you

And after that, you’ll have to answer four identity verification questions about yourself — which are probably pulled from your credit report based on the information you gave above. (According to the people at SmartyPig, this is a soft credit pull, not a hard one.) Once you’ve answered these questions, there are a few more terms of service to read and agree to, and then your profile will be created!

Now, to create a savings account in SmartyPig. Like ING Direct, SmartyPig allows you to have several savings accounts (or sub-accounts) within your profile. This is really handy for people like me, who have multiple savings goals. In my case, I’ll just set up the one for my Future Car Fund for now. But if I like SmartyPig a lot, it could become the place for all of my new savings goals as I come up with them.

To create a savings account, all you need to do is link it up to a funding source: an existing checking or savings account of yours. Once you’ve done that, you can create your first savings goal! You must set your savings goal, which can be changed later. I want to buy a car, probably about 5-10 years from now, depending on how my current car holds up and what happens in the rest of my life. For now, I’ll set the goal as low and far away, since I don’t have much money to contribute to this goal yet. Later, when I’ve got more money to contribute each month, I’ll adjust it. Honestly, I wish they made it a little easier to just say “$10 per month” instead of having to fiddle with the target amount and date.

A new savings goal requires an immediate deposit of at least $25. This was something I didn’t exactly care for, but thankfully doesn’t throw much of a kink into my plan. But now it’s something you can be aware of going into it, that I wasn’t aware of myself. So just to reiterate: for a new savings goal, you’ll need to be prepared to make an initial $25 deposit, and commit to automatic deposits of at least $10 per month thereafter (until your goal is complete).

So after you set up your initial deposit, figure your monthly contribution, and (of course) agree to some more terms of service, your new SmartyPig savings goal will be set up. Now, you might want to move more money into the goal. Maybe you’re like me, and you already had some money for this goal sitting in another savings account. Or maybe you’re like me in that someone gave you a SmartyPig gift card. Both are fairly straightforward and easy to find in your profile.

SmartyPig is a bit more stilted and rules-y than other savings accounts, but that might actually appeal to a lot of people. Some of us just need a lot of rules and automatic transfers to actually set and meet goals. Also, the higher-than-most-online-banks interest rate that they’re offering at the time of writing this (3.05% APY) is primarily what attracted me. (That and winning the $50 gift card, of course.)

If you like, you can open your savings goal up to friends and family to contribute to. If you do this, you can add a cool little widget to your website or Facebook profile, inviting people to do so. Like this:

Of course, you are all welcome to help me out with my future new car. 😉 I’m thinking a hybrid or an electric… or whatever awesome technology they have by the time I’m ready to trade in the Oldsmobile. What do you think?

Today is my last day of college… assuming my presentation tonight goes well (which it will!). You would think I would feel… elated? Scared? Hopeful? Hopeless? Helpless?

I don’t feel much of anything, really. Maybe I’ve become jaded by years of final exams – being on the “quarter system” instead of the semester system means I had 50% more “finals weeks” than my friends from high school. You get pretty used to the drill – presentations and multiple choice exams, or, as it was when I was in film school, endless screenings of films.

Tomorrow is supposed to be a brand new day! My first day as a graduate! Except I don’t walk the stage to get my diploma until May, and job applications and cover letters just feel like more homework. Nothing feels like it’s changing, because changes are more gradual than that. Like graduating from high school: nothing really changed then until my mom and my sister put the last box in my dorm room at the end of the summer, and said “See ya!”

So maybe it won’t feel different until I start a job, or move. But regardless of what it feels like, things are different. My student loans have come due, and I can only be a mooch for housing for so much longer (Thanks Mom! Please don’t kick me out yet.). And my savings goals? Those have to change with me.

The Old Savings Snowball

Here’s what my savings snowball looked like the last time we checked in:

Name	Goal Total	Progress	Monthly Payment
Getting Established	$2,000	$1066	All extra $$
Emergency Fund	$10,000	$425	$10
Future Car Fund	$10,000	$55	$10
Retirement	Infinite	$36	$5
Student Loan Interest	$500	$68	$60

Remember, the idea is that I pay the monthly payment on every goal except the top one. For the top one, I throw as much money at it as I can, so that I can achieve it as soon as possible.

What’s Gotta Change?

Getting Established Fund: It doesn’t make any sense to contribute to this anymore, because it’s time to start drawing from it. I’ve officially entered the Getting Established period. I don’t intend to spend the money all willy-nilly, but it’s there to get me on my feet now. Basically, I’ll pay for what I can out of pocket, and if I need more money each month, I’ll draw it from this fund, first.

Emergency Fund: It’s a little bigger now! Is $10,000 an insane goal for this? Kinda – but it’s a long term goal. Right now I’m just happy that there’s anything in there at all!

Future Car Fund: My current car is still running fine, thank you very much. Although it seems like I’ll be needing new tires in the near future, the rest of the car is just dandy. Passed inspection not too long ago, actually.

Retirement: Ah yes, my teeny tiny fund. No plans to up the contribution to this until I, you know, get a job.

Student Loan Interest: Dead! I’ve paid everything in the fund to my loans, again. Now some of my loans are going to enter repayment, so I won’t be saving money up for them anymore, I’ll just be, you know, paying them.

So, two categories gone off the list – is it time to add a new goal?

Yes! Last week, I was asked to be a part of my brother’s wedding party, and it’s probably going to cost me more than a pretty penny. I don’t have solid numbers yet, but I do know the wedding will be around October of 2010 and it’s a destination wedding. So, it will be my Bro’s Wedding/Travel Fund all wrapped up in one. I’m estimating I’ll need to save at least $150/month for that. I’ll adjust that number as plans become more solid.

New Snowball!

Name	Goal Total	Progress	Monthly Payment
Bro’s Wedding	?	$0	All extra $$
Emergency Fund	$10,000	$514	$10
Future Car Fund	$10,000	$76	$10
Retirement	Infinite	$47	$5

I considered “upping” my contributions to my Emergency Fund, but that doesn’t make much sense if I’m drawing money out of my GE fund, now does it? It’s just shifting money around at that point, and may cause me to have to draw from my Emergency Fund, as well. I’ll reevaluate contributions when I have… that thing… what’s it called again? Oh, a “job.”

I set up my savings snowball in August, right after I paid off my credit card debt. It’s been going pretty well since then – I gave an update in October when I decided to change a few things. Now that it’s the new year, it’s time for me to take another look and make some more adjustments.

Adjustments are the key to the savings snowball – unlike a debt snowball, it’s not a "set it and forget it" type of thing. Savings plans tend to change a lot more than debt payoff plans. It has to do with that whole Randy Pausch "you can only change the plan once you have one" thing.

Here’s what things looked like in October:

Name	Goal Total	Progress	Monthly Payment
Textbooks	$400	$495	Done!
Student Loan Interest	$1,500	$584	All extra $$
Getting Established	$2,000	$100	$50
Emergency Fund	$10,000	$382	$10
Future Car Fund	$10,000	$25	$10
Retirement	Infinite	$26	$5

So, what’s happened since then?

• Made exactly $5 in interest on my savings in November – $5 for zero effort isn’t too shabby.
• I took $1323.69 out of my "Student Loan Interest" savings account and sent it to my student loans.
• I’m done buying textbooks – potentially forever.

So the textbook fund has been knocked off the list, and the money left over in it has been rolled into other savings goals. Student loan interest is no longer a top priority – $60 a month should stave off interest until I begin repayment, so it doesn’t need to be at the top of the snowball right now.

Should I raise the minimums on some of my goals? My car fund and retirement fund are obviously growing at a snail’s pace. But my Getting Established fund is pretty important to me, because graduation is now only a few months away.

Unlike debt repayment, these choices don’t have to be 100% right, right now. Money in savings can be moved back and forth as I change my mind about things – unlike debt repayment, where once you make a payment, that money is gone. So, here’s my off-the-cuff new savings snowball:

Name	Goal Total	Progress	Monthly Payment
Getting Established	$2,000	$1066	All extra $$
Emergency Fund	$10,000	$425	$10
Future Car Fund	$10,000	$55	$10
Retirement	Infinite	$36	$5
Student Loan Interest	$500	$68	$60

So, not many huge changes. I would like to save enough to open my IRA in 2009, and I would like to start a fund to pay for braces, but now isn’t the time. I have to focus on the Big Bad coming up: graduation. That means getting ready to make payments on my student loans, and cushioning that Getting Established fund as much as possible.

This is the plan until then. After graduation, everything will change.