Losing Interest On The Plain Old Savings Account

That’s exactly what I did with the savings that I’m rebuilding.

I opened a new stock trading account at ShareBuilders and pay a $4/month fee to invest my savings deposit into shares of iShares Barclays Treasury Inflation Protected Securities Bond Fund (TIP).  If I’m going to pay a monthly service fee for saving money, I might as well get my money worth.

Unlike a regular savings account, I’m extremely reluctant to move money out of a stock brokerage account.  A transfer usually takes three or four days to be processed and figuring out the capital gains for tax purposes takes that long too.  The quarterly dividend payment will be more than what I get in interest from the bank and is automatically reinvested into the fund.  A bond index fund avoids the complications that comes from directly investing in Series I savings bonds and safeguard my money from deflation and inflation.  Based on all the information that I read in recent months, I suspect inflation will be an issue in the future.

This works as long as the stock market doesn’t go belly up.  Unlike plain old savings account, there’s no insurance protecting a stock brokerage account.  If everyone cashed out their chips at the same time, my entire savings will disappear.  Considering that federal government had bailed out Wall Street once already, and the bankers are still gambling that the federal government will rescue them again, a total economic collapse seems unlikely.

A more conservative option would be to open an Orange savings account that pays better interest rates and doesn’t charge a monthly service fee.  I have a small savings account with them for leftover gas money from my budget to cover car expenses and save up for a new used car.  I could’ve opened another account with them.  That wouldn’t removed the temptation from periodically raiding the account.  A stock brokerage account forces me to consider the costs of moving my money around.