This week I closed out my savings account at Wells Fargo Bank after it dwindled to nothing from being unemployed and living on unemployment benefits for nearly a year.  I didn't have enough cash for the minimum balance to avoid the $3/month service fee and the savings account paid next to nothing in interest rates.  (Business Week reported today that the banking industry made $52 billion from paying less interest on deposits, an indirect gift from the federal government to rescue the banks from bad loans while soaking savers.)  The situation with plain old savings account is so bad that putting money into the stock market is the next best thing.

That's exactly what I did with the savings that I'm rebuilding.

I opened a new stock trading account at ShareBuilders and pay a $4/month fee to invest my savings deposit into shares of iShares Barclays Treasury Inflation Protected Securities Bond Fund (TIP).  If I'm going to pay a monthly service fee for saving money, I might as well get my money worth.

Unlike a regular savings account, I'm extremely reluctant to move money out of a stock brokerage account.  A transfer usually takes three or four days to be processed and figuring out the capital gains for tax purposes takes that long too.  The quarterly dividend payment will be more than what I get in interest from the bank and is automatically reinvested into the fund.  A bond index fund avoids the complications that comes from directly investing in Series I savings bonds and safeguard my money from deflation and inflation.  Based on all the information that I read in recent months, I suspect inflation will be an issue in the future.

This works as long as the stock market doesn't go belly up.  Unlike plain old savings account, there's no insurance protecting a stock brokerage account.  If everyone cashed out their chips at the same time, my entire savings will disappear.  Considering that federal government had bailed out Wall Street once already, and the bankers are still gambling that the federal government will rescue them again, a total economic collapse seems unlikely.

A more conservative option would be to open an Orange savings account that pays better interest rates and doesn't charge a monthly service fee.  I have a small savings account with them for leftover gas money from my budget to cover car expenses and save up for a new used car.  I could've opened another account with them.  That wouldn't removed the temptation from periodically raiding the account.  A stock brokerage account forces me to consider the costs of moving my money around.