It’s said that one should always keep at least three months of savings, some say even six months worth, in a high interest savings account. I completely agree, and definitely recommend at least three month’s worth. Keep this money in a high-interest savings account, preferably an online one like ING Direct or HSBC. If you keep it in an account with the bank with whom you have your main chequing account, you’re going to be seeing that money consistently and if you see the money there there is a good chance you will spend it.

There’s a mental aspect to this as well: if you keep your savings account with your regular bank, you’re going to be constantly seeing that money and being aware that it’s there, making you more likely to spend it. When your savings are entirely separated from your chequing account and bank, you can’t see that money and you’re less aware that it’s there.

If you’ve got international connections, you can be extra sneaky by taking advantage of higher interest rates in foreign countries. For example, my fiancee in Australia has a savings account which offers him 7.0%, which is much higher than the 3.65% offered to me by ING Direct Canada. Of course you need to be able to fully trust anyone to whom you send money, but in the case of it being a trustworthy family member or spouse, this is a great way to take advantage of savings accounts.

Now for recommendations. Always make sure your bank is insured (in the USA this is with the FDIC).

ING Direct is one of the most popular ones. If you have a friend or family member who already uses ING, ask them for a referral. If you deposit $250 or more initially and keep it in ING for 30 days or more, you get an extra $25 and the person who referred you gets $10. Not being American, I don’t have a referral link to offer you, so you’ll have to find your own referral.

In Canada, the referral is only $13, but still an extra little wad of cash. If you’re interested, e-mail me and I’ll send you my referral link. If you’ve been thinking of opening an ING Direct account, take the referral route as it’s free cash. What could be better?

HSBC Direct is another popular option, which usually offers the same, or similar rates to ING Direct. In Canada the HSBC Direct rate was 4.75% until May 2nd, which was a full 1.10% higher than the ING rate. Given our half percentage interest rate cut, this is likely to go down, but ING’s rate is likely to drop as well. However, HSBC does not have a referral program in place.

These are the two banks I would personally recommend. If you want to be particularly smart, use your ING Direct account for a referral, keep the money in the account for 32 days and then take it out and move it to your newly opened HSBC account. You’ll likely lose a few days worth of interest, but it will get you the $25 (or $13) bonus as well as the best rate.

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