How You Can Help Your Parents Make More From Their Money
Jennifer Wayne was one frustrated women. No matter what she tells her parents about putting their savings in higher return accounts, they just won't be able to accept it. Just like many elder citizens, Jennifer's parents prefer the old way of saving and letting their money grow without risking their money with investments. They have most of their money in CD and a good amount of instantly accessible cash in a normal savings account.
"It drives me nuts every time the Government decides to lower interest rates when it is already dirt cheap," says Jennifer of the impending global economic slowdown. As an executive in a trading firm, Jennifer is seeing first hand how inflation alone can shrink the money that her parents worked hard for. While she herself have a substantial portfolio in stocks and bonds, her parents choose the least risky way to stash their money.
"My parents were not rich and they treasure security among everything else. I would have been able to grow those funds if only they'd let me," she adds. Sure, Jennifer's parents did invest in stocks when they were younger, but they have had bad experiences and now that they are retired, their risk tolerance is also lower.
All that has changed when Jennifer discovered a savings account and CD with significantly higher returns without any additional risk in 2006. "One of my colleague was asking me to open an online savings account and she said I can get $25 right away just by having an account on top of the higher interest rates," Jennifer recalls. Her colleague in return got a $10 reward just by telling her about this high yield account.
"Back then, I was getting more than 5% APR, which is higher than any conventional CD in normal banks, and this is only a savings account," she goes on about her ING Direct account. Her parents are reluctant at first, but they too, jump in the ship when Jennifer show them her account. She also got her boyfriend, Thomas Carnegie to open an ING Direct account 'since it's free and it pays'. All of them have been rewarded with the $25 incentive and Jennifer got $30 helping them open their accounts. That's a $130 in total of free money.
Although interest rates has since decreased due to market performance, Jennifer's parents has managed to secure double the rates offered by her conventional CD. "We got in a 6.2% APR and we never looked back," say Diane Wayne, Jennifer's mom. ING Direct's current CD rate is capped at 4.25% for a 60 months period.
Rates for online banks will always be much higher than conventional banks due to low running costs and low overheads from not having to run multiple outlets like normal banks. At the time this article was written, ING Direct is offering up to 8 times the current national saving return average, or as high as 3.25% for balance above $100,000, and 2.75% for lower amounts.
Jennifer feels that although her parents are afraid to take risk in high return investments, they are at least getting their money to work hard using an online bank such as ING Direct. "Now, this is all they talk about to friends and family members who keep their money in a normal bank," she said with a wink.
Originally posted 2008-11-06 18:33:36.
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