How does a savings account work?

**lullaby80** · 03-08-2007, 01:55 PM

Ok this might seem like such a dumb question for many. But I'm thinking about putting my EF in an ING savings account. If the intrest rate is 4.5%, does it apply monthly? Lets say I put in $1000. After the first month the balance will be $1045? And will that 4.5% then apply to that amount, making it about $1092 the next month? Gosh I hope I'm making sense..

**FrugalMomof3** · 03-08-2007, 02:00 PM

I think the 4.5% is actually the annual percentage rate but dont quote me on that, I've never had that much money in that account to actually know for sure, I think quite a few ladies on here might have a more specific answer and I am all ears.

**Jenna** · 03-08-2007, 02:02 PM

Originally Posted by lullaby80

Ok this might seem like such a dumb question for many. But I'm thinking about putting my EF in an ING savings account. If the intrest rate is 4.5%, does it apply monthly? Lets say I put in $1000. After the first month the balance will be $1045? And will that 4.5% then apply to that amount, making it about $1092 the next month? Gosh I hope I'm making sense..

The 4.5% is the Annual Percentage Rate (APR) - it applies over the year.

1000 @ 4.50%

One month $1,004
Six months $1,023
One year $1,046
Five years $1,252
Ten years $1,567
Twenty years $2,455

**lullaby80** · 03-08-2007, 02:06 PM

Ah, now it makes more sense, thanks. I was getting all excited there for a while

Thanks!

**acidcookie** · 03-08-2007, 03:40 PM

Yeah, over the year you'll make 4.5% meaning that you can expect about $3.75/month (1/12 of that percentage) assuming you keep that $1000 in there. Unless interested is compounded, then you'll earn on the $1003.75 the next month and so on. But still 4.5% over the whole year on the balance.

**freyadog** · 03-08-2007, 05:02 PM

Ok so If you have a $1000. would it be better to put that money in a savings account or in a cd for 6 months or whatever? I'm lost here in my own thoughts. If the answer is cd then at the end of the 6 months do you roll it over?
Barbara

**acidcookie** · 03-08-2007, 05:10 PM

Originally Posted by freyadog

Ok so If you have a $1000. would it be better to put that money in a savings account or in a cd for 6 months or whatever? I'm lost here in my own thoughts. If the answer is cd then at the end of the 6 months do you roll it over?
Barbara

Guess it depends on which account will give you higher interest and whether you can go without touching the money. I have $3,000 in a 6 month CD right now because the interest rate was 5.51%, but it means I can't access the money at all till it's "matured."

**acidcookie** · 03-08-2007, 05:13 PM

Bankrate.com is helpful here. You can compare rates and all sorts of other info between money markets, CDs, etc.

**freyadog** · 03-08-2007, 05:16 PM

acidcookie, do you roll this over (the cd) into another cd for 6 more months? I am just trying to get a handle on how this works. The money can sit. Now problem to us there.

**acidcookie** · 03-08-2007, 05:23 PM

You can renew the CD, yes, or just take it out once it matures. I know my CD gives me the option of keeping it in there for another 6 months.

But for mine, the 5.51% rate is only a bit higher than my regular money market account (5%) and I'd like to have that money just in case I need to access it so I'll likely be moving it out into my regular account.

**freyadog** · 03-08-2007, 05:41 PM

thanks girfriend for the information. Now I understand how this works. Went to the link and great information here. Will know all about this stuff when we hit the bank.
Barbara