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How do you create ING sub-accounts? All additional savings accounts I've created show up a separate accounts with their own numbers, am I missing something?
How do you create ING sub-accounts? All additional savings accounts I've created show up a separate accounts with their own numbers, am I missing something?
Also Ally offers 1.7% APR online savings account.
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@georgi55: Ally also has a \"no-penalty\" 9 month CD, which has only a slightly lower APR than the savings account. (A couple of weeks ago, it was actually even higher than the savings account.) The rate is locked in for nine months, and there's also no penalty for early withdrawal, unlike traditional CDs.
Also the link at bottom takes me to Home Equity Loan vs. Home Equity Line of Credit at [www.budgetsaresexy.com]
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Uhh, this doesn't quite work.
Let's take AppleCare for example. $70 for an iPhone, and the cheapest iPhone 3GS is $200. AppleCare extends the 1-year warranty by 2 years, making it a 3-year warranty.
You buy the phone and put $70 into an account with 1.3% APR. For the sake of argument, we'll say that the APR averages 1.5% over the course of three years. In that period of time, you would earn $3.19 of interest. Yes, three dollars and nineteen cents. You would have $73.19
So your phone breaks after 15 months of use. I can't calculate interest, so let's just say you have the $1.05 of interest from the first year of the account, and you have $71.05 in the account. Your phone cannot be fixed. What do you do?
Insurance is not the same as a loan, especially insurance that you pay in one lump sum.
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@TCama: Actually the iPhone example is interesting for another reason, you pay $200 for it with a contract, but if it breaks you need to pay full price for a new one which last time I checked was like $600 or something. In this one case I might advocate the extended warranty, although I did not buy one with mine.
@TCama: I came here to post the same thing; this only works if you're buying a fair amount of high priced electronics, if you only buy the occasional thing your fund will never grow large enough to cover the cost of repair when something does crap out. If you're rich and are regularily buying items which would necessitate an extended warranty and your warranty fund does grow to $500+ (not an unrealitic cost for a laptop repair), you can probably just afford to pay out of pocket for any repairs that come up anyway. For the average person that purchases one high ticket item every year or so, this makes no sense financially.
@TCama:
Extended warranty providers make money because only a small percentage of devices break during the warranty period. By setting up an account you're saving money based on the same concept, only on a smaller scale. It will more reliably work in your favor at a large scale. I would guess that with somewhere around 5-7 devices it's likely to work out in your favor if you put the extended warranty money in a bank account. With too few devices it's a bit of a crapshoot. To calculate your expected outcome you'd need to know failure rates and warranty costs.
There are other factors to consider too. Some devices have particularly high failure rates that aren't always reflected in the warranty cost (warranty cost is usually based on price). Some credit cards will extend your warranty for another year for free. Some stores will extend the warranty for free (Costco).
Remember when you were in high school, you wondered when you were going to need all of that math? Now is when you need it. How often do we see people who are in financial ruin because they didn't understand the mathematics of money?
@Cant_stop_the_rock: I think the only issue is you may not have all the data for your devices especially in terms of how often a device is to break.
There is also another issue to consider. If Costco extends the warranty what do they do in the instance of failure compared to what you have to pay to extend the warranty. For instance, on the iphone example (though I do not know if they are sold at Costco lets just use if for illustrative purposes) if Costco extends for a year v. apple but you have to jump through 15 hoops with Costco and it is a huge pain it may be worth it to go with the Apple warranty if they do a better job of servicing the item/don't make you jump through huge hoops to get the warranty.
I remember back in the day I got warranty on a computer from Best Buy (I was young and I made many mistakes I would not make today such as even stepping foot in BB). Anyway, my CD-ROM (see it was awhile ago) broke and BB was supposed to fix it. I had to bring in like 10 CDs and put them in to show the drive was broken but on every CD they claimed there was a minuscule scratch or something that was causing the problem rather than a problem with the CD-ROM. I finally bought a new CD opened it in front of them and had them put it in and of course the CD-ROM was still broken. Then, in the pre Geek Squad days they could not even fix it on the premises. They had to send the whole computer away and it took a few weeks to replace the CD-ROM. To make a long story short if I had had to pay extra for a warranty where I did not have to bring a team of engineers just to prove a problem and then wait 2 weeks to replace a CD ROM it would be worth it.
Bad example as Costco requires you to jump through less steps than anyone
@TCama: This only works if you buy more than one thing that could potentially break. Say you buy a $200 iphone, $400 washer, $500 refrigerator, $400 dryer, and a $500 stove. Extended warranties for all of these would cost well over $500, while chances are none of them will break between years 1 and 3 of their lifetimes. Even if one does, you're still ahead. Interest has nothing to do with the equation, except that it's a small bonus. Add this effect up over everything you buy, and you'll usually come out ahead.
Insurance is essentially lodging a bet that your item will break in the span the insurance covers it. For some things, it definitely is worth it because the product is failure-prone. For most others, it's a complete ripoff.
@TCama: You fail to take into account the rate of failure, and the fact that you will have additional monies from other self-insured items in that account. It is unlikely your iPhone will fail within 3 years. Just as it is unlikely your HDTV, your DVD Player, your Washer/Dryer and your Refrigerator will fail in that time period. By pooling all that money into one fund you will still be better off then if you had purchased separate warranties.
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@TCama: I think it might work if you do this for a few products at the same time. You'd be betting that not ALL of them would break, and atleast the one that did break would be repaired or replaced under the collective sum.
It would also work better if the interest rates were higher.. but I'm not holding my breath.
@TCama: That example is flawed because you are focusing only on one purchase. During that time you might have bought a HDTV, and put away $200, 300 into your own warranty account. As you buy more stuff, the more money you will have that you did not pay to the store for their extended warranty, and chances of all your purchases braking at once is slim
@georgi55: But the chances of more than one breaking over the life of the warranty is not slim. So now you have $375 from your HDTV and your iPhone. Your iPhone breaks month 15 and your TV breaks month 27. You had to use $200 to buy the new iPhone you did not insure and now a $350 bill comes in for the TV - what do you do?
True, both may never break but that is the idea of insurance. You pay a certain amount now to insure against large losses later. I have a computer that has broken multiple times. The $300 warranty has paid for itself over and over again. I ran the risk of having the computer never break but I slept easier at night knowing I would not have to foot a $500 repair bill or have to buy a new computer because I had the warranty.
Anyway what TCama is pointing out is that these things work out in the extreme aggregate - Apple sells millions of iPhones and knows the usual number that break and the cost of repair and therefore can offer an insurance plan based on thousands or millions of items. For an individual though they may get luck/unlucky. If you get unlucky the plan outlined in the post has serious shortfalls.
@RPHP,
If you can't afford the risk of an unlikely event, then letting someone else insure it may absolutely be a better choice.
One of the hidden assumptions behind buying several things in the ~$500 range and building your own insurance pool is that if you had a string of bad luck in those products, you could afford to make up the difference in the short term and count on things to balance out in the long term. For example, if you keep at least six months' salary in savings like financial planners recommend, you have a back up for your insurance pool.
By contrast, if you buy 2 or 3 cars for your family and choose to self-insure them (i.e. buy liability-only insurance) you would need a much bigger backup pool to draw on to cover the chance of two cars failing on you at the same time. Only fairly well-off people (or people who purchase cars that are inexpensive relative to their means) could afford to handle a scenario like that out of pocket.
The good news, of course, is that the chance of multiple failures is relatively low -- if you buy two products with a 10% chance of failure each, there's a 1% chance of them both failing. If you buy two with a 20% chance of failure, there's still only a 4% they will both fail.
Of course, some products are prone to failure at a much higher rate, and may make an extended warranty a good deal even if you could afford to pay out of pocket. In December 1994, I found an incredibly good deal at Best Buy to get a pretty powerful $1000 laptop with a $350 rebate. Even for a $1000 laptop at the time, it was a great deal, but the downside was that the brand was eMachines. I would not have bought it without the extended warranty, and it turned out to be a great deal. The extended warranty was based on the $650 price, but when the machine failed the third time and invoked their lemon rule, I was credited $1000 toward a new computer. Bought one (not an eMachines this time), plus a new extended warranty. That one crapped out as well after a couple of years. Got another computer for $850, and got the extended warranty for the price difference. Haven't had to buy a new computer for my wife (for whom a laptop is not mission critical) over those 5 1/2 years. Dealing with them sending it off every so often was really annoying for a while, but we now have a netbook we can use as a \"spare\" if another computer breaks down.
The moral of the story is one of two things: (1) don't buy a crappy computer in the first place, so they won't break, or (2) you can assess your risk profile better than Best Buy (or whoever) can. If you have reason to believe you are at a high enough risk relative to the warranty cost, buy the extended warranty.
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@TCama: I was thinking the same thing. Gamestop only charges $20 for an extended warranty on a 360 and the lowest cost 360 is $199.
Why not buy everything with a credit card, enjoy the rewards, protection and pay in full each month?
Guys no where did it say that you can pay for repairs just from the interest, re-read #3, it says for ALL purchased. You will be putting money away that you would have paid for store extended warranty for TVs, phones, Mp3 players, cell phones, furniture, what not. After you add all of those extended warranty fees you would have paid, you will have a pretty big account, but the chances of all your purchases braking is very slim, and even if one or two break, you've got your own extended warranty fund you can dip into.
On the other hand, if you buy electronics from other countries while on vacation, it may be smarter to purchase a manufacturer extended warranty if offered. Example- I bought a Panasonic Toughbook T5 in Japan. Extended warranty from Panasonic Japan is about US$150 and covers liquid, fire, and impact damage as well as hardware failure for 3 years (yes, they ask for address and such; I guess it helps to have someone living in the country). Screen cracked 1 month from purchase. I was silly and didn't buy the extended warranty. Over US$1400 for the replacement LCD (or US$350 for a Toshiba LCD modified to fit the Panasonic laptop but that would void the existing hardware warranty). I bit the bullet. What else can you do? I mean, it's survived being drop-kicked by an Indian classmate (long story) after that as well as countless other mishaps so obviously that was bad luck.
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You do not need separate accounts. Just add a line item to your personal budget called \"future repairs\"
Don't over complicate your life with extra accounts for this and that.
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I just got one of those pre-approved offers to start an ING savings account, however, I get a decent interest rate through USAA when compared to other banks, so I'm going to wait until interest rates get better before going to them.
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I love these tips which are clearly for people with more money than brains.
It seems as though this can easily translate into insurance as well. For instance, at the moment we're shopping for pet insurance for our new dog. Currently we're looking at roughly £40-50 per month for him. We also have a cat who cost about £15 pm but he's roams free and is also a tough one which likes to fight so it's best to have it on him. Where as our dog is never let free, aside from in the back yard and is always on a lead when out with us otherwise.
If our dog is going to run us about £40-50 pm why not pay that to ourselves? Over 10 years that can easily translate into 4-5k if there is no injury (and if we're diligent in paying ourselves). I'm aware that a major injury can easily cost 2-3k in vet charges but hopefully that's a slim to none chance.
What are others thoughts on this. Is it worth the gamble/savings.
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Econ 101 (or at least 301)--self-insure against small losses.
@babyruthless: I wish I could do that with health insurance. Get a catastrophic policy and go on my own for the normal stuff.
The same issues might come into play however. Do the repairs cost much more for us than they do for the extended warranty companies? It could make us getting it repaired to expensive, when it wouldn't actually cost them that much?