Have you ever looked at the interest rate you get on your savings account? If you’re with most banks, its probably less than 1% – much less. I’ve seen rates as low as a quarter of a percent.

Places like ING Direct are great low-risk way to get some interest on that emergency stash you’ve been saving. Normal banks love it when you save in their “savings” accounts because they pay so little interest. ING Direct classifies itself as a “high interest savings” account. They currently pay 4.30% APY – much better than my bank (and probably yours).

How it works

ING’s banking demo is probably the best way to learn about their services. If you want something faster, read this:

  1. You give them your personal information, and they establish an electronic link between your bank account and their savings account.
  2. You transfer money between your bank and ING by using their online interface. It takes a few days to transfer money between accounts.
  3. The money in ING earns 4.30% interest.
  4. You make more money on your savings.

Its a simple system and has served me well over the past few years. My money is only a few days away if I need it. In 2006, I made over $180 dollars by putting money in this account that would have sat in my bank otherwise.

Want free money?

If you decide to sign up with ING Direct and you will be depositing $250 or more, you can get $25 free by having a ING Direct member refer you. Of course I’d be happy to help you get that free money. Email me at ing-savings@layer2.org with your first and last name and I’ll send you a referral link pronto. I get $10 if you decide to sign up. It’s true – I’m not joking!

If you like, I can also refer you for the Electric Orange checking account (see below). The reward is the same.

Need faster access?

If 3-4 days isn’t fast enough for you, ING now has an Electric Orange checking account. The interest rate isn’t as high (3.50% APY for deposits under $50k), but you do get instant access to your money via a MasterCard debit card. I’d personally rather have the higher interest rate, but some people might find the Electric Orange account makes a good replacement for their existing checking account.

Best use of the account

I’m no financial advisor, but it seems to me that its not the best idea to invest large sums of money with ING Direct. I went to our mutual fund advisor today and I don’t think a single fund had less than 6% interest for the last year. Some had over 20%. While you have to choose a mutual fund for its performance over time (10 years or longer), it is clear that most mutual funds are going to perform better than ING Direct, although with slightly more risk.

If you’re investing over $10k, you’re probably past the point of saving money for emergency purposes and saving more for retirement or other financial goals. I think ING makes a good vehicle to get more out of your everyday dollar, but don’t forget the power of a more traditional investment option.

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