Step Two of paying off student loans: A new account

by Nick on July 29, 2010

Because my time frame to save up enough to pay off my student loans by the end of 2011 is a short one, I’m willing to sacrifice interest rates for lower risk to my capital.  But I want to earn some interest on my money, so I set up an Ally bank savings account.  It was very easy.  It pays a little more interest than my other online savings account and I like that it can be linked to their 5-year CD and earn almost 3% APY with only a 2-month early withdrawal penalty.  Win win.

So every month I will buy a 5-year CD.  I believe interest rates will likely either remain the same or go up between now and the end of 2011, but I’m not relying on the interest for my plan.  It’s just a bonus and fun to find (for me – sad, I know).  I’ll continue to evaluate the interest rate v. early withdrawal issue as I go along just to make sure it continues to make sense.  I expect to pay the early withdrawal penalty but that’s a cost of doing business here and worth it for me.

Even without earning any interest the plan is worth it to me.  It’s not about the math, remember?  But if I enjoy finding a few percent interest here and there and it doesn’t take much time to set it up and do an electronic transfer, it’s worth it to me.

Am I still crazy?

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