A Savings Plan For 2007: The Ulysses S. Grant Plan

After posting a series of savings plans this week, I received the following email from a reader:

I was wondering, could you also do an entry in that series if someone puts $50 away? I’ve shown the article to a few people, and their incomes gravitate to more of $x per month, and around $50 max to do this.

So, here it is, an additional installment in the Presidential Savings Plan series, the Ulysses S. Grant Plan.

These calculations take advantage of offers and promotions available in December 2006 and also use interest rates from that time to calculate returns. While the plan still works, the exact dollar amount returned will differ.

Ulysses S. Grant. Does a name conjure up images of smoldering Civil War battlefields more than his? He led the Union to victory in the War Between The States, and his countenance issues a challenge: what happens if we can save fifty dollars each month this year? Where will we be at the end of the year? Let’s take a look.

How can I save $50 a month? To save $50 a month, you just need to live a little more frugally, since $50 in a month boils down to about $1.66 a day. Some great ways to do this are to eat out less often, buy fewer frivolous items (music, games, etc), and so forth. If you do these things, or evaluate your own life to find areas where you’re spending too much money, you should be able to free up $50 a month for building your future.

What are the rules? Each month, you put away $50 towards an investment goal. The goal is to not risk any principal in this investment, to keep it liquid, and to have it set up so that the investment is as easy as possible. To do this, we will be using two online savings accounts in tandem: HSBC, because of the 5.05% APY interest rate, and ING Direct, because of the solid 4.5% interest rate and the $25 signup bonus.

How much can we turn $50 a month into by the end of the year? You’ll need to immediately sign up for an account at HSBC Direct. They offer a 5.05% APY interest rate on their basic savings account with no minimum. You’ll also want an ING Direct account later in the year, because when you make a $250 opening deposit into an ING Direct account with a promotional code, they’ll give you $25 just for signing up. After the two week waiting period is over, you can transfer the $275 back into the HSBC account.

On January 1, we start saving $50 a month. We set up an account with HSBC Direct, make an opening deposit of $50, and set up an automated plan to withdraw $50 from our checking account each month.

On February 1, we have $100.15 in the account. Not a bad start, but we’re just getting going.

On March 1, there is $150.51 in the account. We’ve already socked away $150 and our earnings are going to go up greatly in the coming months. It will be a fun ride.

On April 1, the account holds $201.05. Overall, we’ve now made over a dollar in interest for the year. Considering the short term of investment, that’s a very good return.

On May 1, the account holds $251.62. It’s now time to open an ING Savings account, using $250 from this account as an opening deposit. Then, in two weeks after the initial waiting period at ING has expired, you can transfer the money back to HSBC.

On June 1, the account holds $327.47. Ah, yes, that nice $25 bonus rewarding us for careful saving. We’ve also made $2.47 in interest so far this year, but it’s about to start getting sweet.

On July 1, the account holds $378.78. We made $1.31 in interest over the past month alone, meaning the account is now earning more than a dollar a month.

On August 1, the account holds $430.26. The account earned $1.48 in interest over the previous month. Slowly and steadily, the amount is building up.

On September 1, the account balance is $481.99. We’re basically halfway to a grand in the bank, as the interest will help us make up the difference. If you can make the $50 goal for ten more months, you’ll have a grand in the bank!

On October 1, the account balance is $533.95. You cracked the $500 mark! At this point, the account is earning enough interest each month to match what you’re saving each day. Your money is really starting to work for you!

On November 1, the account balances at $586.06. The money is steadily rising, like rainwater in a puddle. Keep it up!

On December 1, you make your final $50 payment for the year, and the account balances out at $638.45. This month alone, you made $2.39 in interest. Every single day, the account is making $0.08 for you, without you lifting a finger.

On January 1, 2008, the account balance is $640.48 (if you elected to continue the plan, the balance is $690.48). During the year, the account earned $40.98, and that’s with your money slowly being deposited throughout the year, not sitting in the account at the start. You’ve probably also noticed how easy it is to trim $50 from your monthly spending, so you’re likely to stick with the plan for the future. About six months from now, if you continue with this plan and just let it sit at HSBC, your balance will creep over the thousand dollar mark!

Amount Saved: $600.00
Amount Earned: $40.98
Percent Return: 6.83% (boosted by that nice ING bonus)

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5 thoughts on “A Savings Plan For 2007: The Ulysses S. Grant Plan

  1. Don says:

    In the words of Dr. Tobias Funke, “You’re blowing my mind, Frank.”

    I just checked my own bank, and the savings APR is 0.598%, and HSBC says the national average 0.54%. I’ve changed my health plan to an HRA, and so have some difference in my favor from the premium difference. I want to put this money in savings just in case I end up needing it (in case I under estimated my flex spending needs with the HRA). Is an HSBC or ING account appropriate? Perhaps the better question is: How available are those funds if I need them for medical costs?

    I’m just paranoid about the whole online thing, and also wondering “what’s the catch” with regard to the MUCH higher interest rate.

  2. United Steelworkers says:

    Over the past few years, the ING Groupe has come under considerable scrutiny for a series of questionable business and investment practices. Check out the facts at http://www.can-you-trust-ing.com

  3. Man on a Mission says:

    On your recommendation I just opened my own HSBC online savings account last week. I liked the option to receive an ATM card – good for those emergencies that you can’t wait for the 2-3 days transfer period.

  4. rodgerlvu says:

    you will make it …

  5. Arthi says:

    When you mention the 6.83% interest rate at the end, it leads people to think that they could get this interest rate for every year that they are using that account.

    Whereas the interest rate is actually 2.66% if you leave out the bonus from ING direct.

    And the reason it is less than the 5.05% APY is because the APY calculates returns for an amount you would have invested at the beginning of the year.

    If you were to invest 600$ in Jan, you would get 5.05% interest at the end of the year.

    But since the investment is drawn out over 12 months, your interest rate would be lower.

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