So long Emigrant Direct, it’s been nice.

I began pulling all my money out of Emigrant Direct and Dollar Savings Direct (effectively one in the same).  I rode the eroding interest rates down hill, although their current rates are still slightly better than I can get just about anywhere else.

The real deterrent was the fact that I couldn’t add my new USAA Savings account as an approved funding account without filling out paper work and sending in a voided check.

In my opinion there is no reason for this.  I was able to set up my Bank of America funding account electronically with no hassles other than waiting for verification of the account.  To require paper forms and a voided check for additional accounts seems illogical and unnecessary.

So I’ve pulled all the money out of both accounts and will dump it back into my USAA savings.  From there I may move it around to take advantage of increasing interest rates in the future, or may buy some short term CD’s.

Banking Dollar Savings Direct, Emigrant Direct, savings, USAA

I’ve always been under the impression that USAA was an insurance company, even though I’ve been bombarded with literature that says otherwise.  I hold my car insurance, primary residence insurance, and now even my rental property insurance is held with USAA, as they’ve been the low-cost provider for all of those.

Yesterday though, I noticed a coworker paid his lunch bill with a USAA branded credit card, and further discussion revealed that he does all of his banking with USAA as well.

Naturally, one would question how you deposit a check to a bank with no physical presence.  And why would you want to incur ATM fees while being forced to use a competitors ATM?  And how do they stack up to my existing bank, Bank of America?

Scan your deposits in… from home.

I’ve noticed over the past several years that the only reason I go to Bank of America is to deposit checks, and make the occasional cash withdrawal.  Honestly, I can’t remember the last time I set foot in the bank itself.  So naturally, I had to wonder how one would go about making a deposit to a purely online bank that is more convenient than driving down the street.  The answer lies in my desktop scanner.

With USAA’s Deposit@Home system, you simply log in to your account and scan in the check to be deposited using your own scanner.  The deposit is immediately credited to your account, and you simply void the check after completing the deposit.

Pretty cool if you ask me.

ATM fees are reimbursed.

Assuming a USAA banking customer would have to absorb the ATM fees of a local bank, since USAA doesn’t have a system of their own ATM’s would only be partially correct.  Yes, you’ll incur some ATM fees, but those fees are actually reimbursed by USAA for the first 10 ATM withdrawals per month, up to a total of $15.   So you can use the most convenient ATM without worrying about the $2.00 transaction fee you’re slapped with.

Some other perks?

USAA offers free checks, interest for checking accounts, credit and debit card rewards programs (with no annual fee), free online bill pay, and no monthly service fees.  They also offer a host of savings options, certificate of deposit (CD) options, and some cool banking options for kids (like a prepaid cash card with parental control).

So where’s the drawback?

At this point the only drawback I’ve found is that they don’t have a physical presence, which should be obvious.  But this one drawback does mean that you won’t have access to a safety deposit box with USAA banking.

Currently, we receive a free safety deposit box at Bank of America since we have a number of accounts with them.  Switching to USAA exclusively would eliminate that option, and we’d need to pay for a safety deposit box.

Beyond that, the issue of convenience has been solved.

I’ll investigate further, but I like what I see.

Banking, Saving Bank of America, banking options, bill pay, online banking, savings, USAA

If this latest economic slump has taught us anything, it’s that you damn well better be conservative with money you’re going to need in the future.  That means money you’re saving for a house, a car, your kids college, and in many cases retirement, better not be rolling in the stock market.

It’s along those lines that I’ve decided not to create a 529 college savings plan for my son.  I can’t afford it.

It’s not that I can’t afford the fees or the up front costs, for those are a drop in the bucket compared to what college will cost in 18 years.  It’s that I can’t afford to have his college fund washed away in a market that can’t be trusted.

I value his education too much, and while he doesn’t know it now, he will value it too.

I was very fortunate that my parents could afford to send me to college (in-state worked out just fine, thank you) and graduated with no debt.  I was fortunate to marry a girl that had the same benefit, and even more lucky that we are able to stay that way (minus a home loan).  So it’s with that experience that I try to create the same for my kid(s).

Wrapping that opportunity into the market is something I’ve declined to do.  For those who have trusted their investment strategy to handle their kids future in this economic environment are now fretting about it.  For those with kids graduating from high school, there’s more than fretting going on.

Some data to back up my position:

There are over 3,500 options for college plans out there, and 93% of them fell in value over the last 12 months.  Nearly 1,100 fell by 40% or more.

The way that some states have handled portfolios leaves one to believe that they can’t be trusted to manage your money (shocker, I know).

Last April, Oregon doubled the stock exposure in its “1-3 Years to College” portfolio to 40%. In 2004, an in-college student in Rhode Island’s aggressive age-based portfolio would have had 40% stocks, 31% bonds and 29% cash. By 2008, the equivalent was 40% stocks (including real estate), 55% bonds and a measly 5% cash.

Other plans took too much risk all along. In Utah, college enrollees could have 65% in stocks. Several states, including Maine and New Mexico, offered 529 portfolios with no allocation to cash for students over the age of 18. Even after North Carolina finally scaled back its risk earlier this month, a college sophomore can still have 43% in stocks, real estate and junk bonds.

Says Mercer Bullard, a securities-law professor at the University of Mississippi: “In some states, the asset allocation for the 16- to 18-year-olds looks as if it was designed by the 5-year-olds.” -Source

You see, many 529 plans are designed like many date-based retirement plans are: the older your kid, the more conservative the portfolio.  But that’s not the way many have been run, and unless you pay attention to where your money is, you wouldn’t have the slightest idea your portfolio is wilting.

Conservative Alternatives

Too many people got caught up in unrealistic returns from the market, and thought that it’s the only place to invest.  They’re paying the price now,  and a 3% return on a guaranteed CD looks pretty attractive.

Ditch the “get-rich-quick” mentality, and set up a structured CD ladder, or if you’re willing to ditch the guarantee, go with tax-exempt savings bonds.

The same goes for retirement.  If you are set to retire, you have absolutely no business having more than 10-20% of your money in stocks.

Based on the number of hands our government has in the free market “trying to do the right thing”, can you trust your kids future to government manipulation?  I think not.

Heck you can’t even trust them with your own.

Finance, Saving 529 Savings Plans, college savings, Investing, savings