5K to invest help

[heyyo2]

I have 5000 dollars taht i want to put in such as a savings account. Im 21 years old. I heard CDs are good but there is penalty for withdrawing early. Some people say just put it on savings accounts but savings account opened at banks have very low interest which is basically nothing. I have another bank that i have 1K in but the interest they pay is 0.25 percent.

I see things online like INGDirect where it pays 4.2 percent on your money. However, they have 2 rates. One that is APY and the other is the regular rate on bankrate.com? I am also not sure how it works.

If i put in 5K at ing direct and say I want to take all my 5K out after 6 months, do i make 5000 X 0.042 X 6/12= 105 dollars?

Of course after taxes I would probably make only 70 or so? Do i have to pay taxes on this? I do not have a job so basically that is my income. I heard you had to make a certain amount to be taxed.

So if i only make 105 dollars for the year, do i still have to pay tax on this?

Any other recommendatoins would be great. Thanks.

[dazraf69]

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If i put in 5K at ing direct and say I want to take all my 5K out after 6 months, do i make 5000 X 0.042 X 6/12= 105 dollars?


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Yes

It is still wise to file your taxes but if your income is only going to be that much then no, from my understanding you will not have to pay taxes on it.

Here is an informative article relating to your question.

http://www.bankrate.com/brm/green/taxes/basics5-4a.asp

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Not according to the IRS. Any interest credited to a nonretirement account and that you can withdraw is viewed by the taxman as income to you, even if you leave it untouched. Each January, you should receive from your bank a form showing how much interest your account earned. A copy of this form, called a 1099-INT, also goes to the IRS to make sure that tax payments on it don't fall through the cracks.

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[gull]

You're are right that you would earn about $105.

I'm not a tax specialist, but I believe you still are supposed to file taxes. However, if your income is only $105 for the year, you won't pay any taxes on it.

By the way, if you want a referral to ING Direct, PM me with your email address.

[Foghatlive]

Citibank a special savings account that has no minimum and pays 4.5%. You just have to open it online, and that's easy. In my years of dealing w/ Citibank, I've found that their technology is great. The problems start when you have to deal with an actual person.

Citibank

[dazraf69]

[ QUOTE ]
Citibank a special savings account that has no minimum and pays 4.5%. You just have to open it online, and that's easy. In my years of dealing w/ Citibank, I've found that their technology is great. The problems start when you have to deal with an actual person.

Citibank

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In addition HSBC has been very good for me. Their online services are great as I have two bank accounts I use. In other words, do you research and figure out which one best fits your needs.

[mclaughlin04]

you should report the 105 but you wont have to pay tax on it.