Go online to find better yields on accounts

As Smokey Robinson sang in his No. 1 hit from 1960, "You better shop around." The Motown legend was singing about love, but the same advice applies when it comes to boosting the rate of return for your savings.

Let's say you've just started a savings program and are trying to build an emergency fund equal to three to six months' worth of expenses, just as the experts recommend.

The national average rate of return for a savings account is 0.5 percent, while money-market accounts return an average of 0.8 percent, according to Bankrate.com.

What's a determined saver to do?

Go online and do a search for high-yielding savings accounts, money-market accounts and certificates of deposit.

"The notion of shopping around and looking for the best rates for a money-market account or a CD, it's being a smart consumer," said Sam Goller, executive director for Stowers Innovations' Achieve Financial Independence Week, which is Oct. 15-21 this year.

You can find yields of more than 5 percent if you shop around for a savings account or money-market account and 5.6 percent or better for CDs, said Greg McBride, senior financial analyst for Bankrate.com.

The Web site has a free search engine to help you find the best rates locally and nationally for savings vehicles, McBride said.

All accounts listed on the site are federally insured, he added.

El Paso certified public accountant Kym Anderson has used Internet bank ING Direct's Orange Savings Account for about five years. The account currently yields 4.35 percent.

"They offer the best rates," Anderson said. "For a savings account, there's no restrictions and no minimum deposit requirement. It's very easy to do over the Internet. The account is also FDIC-insured, just like any other bank."

Anderson recommends that most savers have a "relationship with a local bank or banker."

"But when the local banks aren't competitive with these Internet banks, there's nothing wrong with putting money somewhere else," she said.

When you're trying to establish a savings program, it's important to put your money into a safe, liquid savings vehicle, where you can access your money easily if you get into a financial pinch, experts say.

But you also need to earn a rate of return that stays ahead of inflation, McBride said.

"Any loss of purchasing power is just as damaging as loss of principal," he said.

The Federal Reserve has increased interest rates 17 times since June 2004.

That hasn't raised the average rates of return much but has helped yields on the top end, McBride said.

"That's why it's important to shop around," he said.

Karl Murphy, chief executive officer for FirstLight Federal Credit Union, said credit unions can provide a good alternative.

"Most credit unions in El Paso are probably paying at least 1 percent on a regular savings account," Murphy said. "If you're looking at money-market rates, credit unions are much higher than that."

When shopping for a savings account or money-market account, make sure the account is insured, experts say.

This is especially important if you're considering going with an Internet bank.

In addition, make sure you understand whether a minimum balance is required.

"If there is a minimum balance requirement that you don't maintain, any fees may offset any additional interest that you earn," McBride said.

In addition, understand what mechanisms are available for putting money into and taking it out of your account.

"Money-market accounts often provide a check-writing feature," McBride said. "Many savings accounts will allow you to transfer money online."

Can you have money deposited directly into the account? Can you mail in a deposit? Those questions are important if you're picking a bank or other financial institution that's outside of your local market, McBride said.

Having direct deposit is an important feature if you're serious about saving money, Murphy of FirstLight said.

This feature can make saving less painful than if you have to go visit your bank or credit union every time you want to make a deposit, he said.

El Paso CPA John Broaddus noted that "interest rates are rising, and there's quite a bit of competition."

Broaddus recommended going on the Internet to research interest rates or comparing newspaper ads from local banks and credit unions.

Savings and money-market accounts are liquid and provide a sound vehicle for an emergency fund, he said.

CDs are also useful, but if you withdraw the money before maturity, you'll face a financial penalty, Broaddus said.

Certificates of deposit are ideal for money you need at a specific time in the future, such as closing on a new home early next year, McBride said.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.