Fighting against bottled water. Very interesting.

In retrospect, the cost differential isn’t as significant as I initially thought; the salaries are usually somewhat proportional to cost of living. One of my friends training in Boston ended up with similar funds as I did, simply because he had a higher salary and did not have a car to maintain. He’s now moving to Los Angeles, which is a sprawling freeway wasteland with traditionally crappy resident salaries.

I gave the salary issue a more quantitative analysis, and indeed it holds true to a certain extent. Take, for instance, the medicine residency program at St. Luke’s-Roosevelt Medical Center in NYC. For 2009, the PGY-2 salary is $58,463.  A subsidized studio runs about $1,600/month near the hospital. Wilmer Eye Institute in Baltimore pays its PGY-2 residents $44,192. An apartment in Baltimore away from the ghetto will cost at least $1,000 a month. The nearly $14,000 annual salary difference in NYC ought to cover the extra housing costs and hefty city taxes. In addition, you’d have to maintain a car in Baltimore.

But wait, you’re comparing a Yugo to a Rolls-Royce! Indeed, higher profile academic centers will still draw residents despite being in a seedy location and offering a lousy benefits package. It actually depends on the city.  MEEI offers a PGY-2 salary of approximately $52,000. Doheny offers a PGY-2 salary of $48,000, but a PGY-3 receives an extra $5,000 annually.

Ultimately, the end result is negligible. Instead, you should ask yourself whether you can tolerate living in a cramped apartment instead of a suburban home with a yard. Can you handle living in Utah if you typically spend your Friday nights at the bar? Or can you handle waiting in line for hours in Central Park to play tennis (don’t forget to buy a public tennis pass, or you’ll be fined!)?

Etrade

Etrade offers full-brokerage accounts in addition to the standard money market account. This means that you can open IRAs and stock portfolio accounts all under one convenient interface. For the longest time, Etrade has offered comparable interest rates to that of other online accounts. At the time of this writing, however, the savings account rate is a measly 0.95%. This rate is still 3-4x what your regular bank (Citibank, Chase, Bank of America) would offer. The redeeming qualities of Etrade include its slick interface and expedient transfers. The web interface is neatly organized according to the type of account you have with them. The monthly account summaries are simple to interpret; you’d be surprised how confusing some bank statements are. Account transfers on Etrade are FAST. Accounts are credited by the evening after you make the transfer, although you may not necessarily be able to draft funds immediately. Your balance begins accruing interest the day you make the deposit. Withdrawing funds directly from Etrade is also convenient; they offer an ATM debit card that is valid at any U.S. ATM machine. Etrade does not have an surcharges on ATM use, and they will reimburse any fees incurred from the other end as well. Overall, Etrade Bank is a good deal.

INGDirect

INGDirect has subsidiaries throughout the world, although the U.S. branch is located in Wilmington, DE. Its Dutch counterpart received a huge bailout several months ago during the banking crisis. Currently, it offers a 1.5% interest rate on its savings accounts. ING’s web interface is fluid, and is easily navigable. The login security is well-designed, with keyboard and graphic validations. Account transfers usually take 3-4 business days to process, so your money doesn’t accrue interest during this period. For instance, if I transferred money into my INGDirect account on Friday, it probably won’t show up until Thursday. This translates into 6 days of lost interest.

This ultimately doesn’t add up to much, but there is still a difference. For instance, assume that the interest rate is 2%. If you deposited $1000 every two weeks for the year (23 deposits total), you’d lose out approximately $7.56 in interest for the year if it took 6 days to process a transaction. ($23,000 will accrue approximately $1.26 daily at 2% annual rate, if you roughly estimate using simple interest). Interpret this however you choose.

Withdrawals from INGDirect must go through your regular checking account, so there is no way to pull money directly out of your money market account unless you have an Electric Orange checking account through ING.

HSBCDirect

HSBCDirect is an online subsidiary of HSBC Bank, which also has branches throughout the world. The U.S. headquarters is located in Buffalo, NY. While the online bank is a separate entity, you can withdraw cash through any of HSBC’s ATM’s without penalty. They currently offer a generous 1.65% interest rate on their money market account, and 2.3% on a 12-month CD. The higher interest rates are generally welcoming, although some analysts say that a higher interest rate may indicate financial turmoil. (A bank in need of cash may offer higher interest rates to draw in more investors) I don’t know what to make of it, since these money market accounts are all FDIC insured (backed by the gov’t). HSBC’s web security is akin to that of INGDirect’s–reliable verification. Its web interface, however, is lousy. The interface is functional, but awkward. The website launches a pop-up window when you make account transfers–this is usually shot down by my popup blocker and Adblock. The accounts also require 3-4 days to process a transfer, just like INGDirect. Nonetheless, they offer decent rates.

EmigrantDirect

This bank is an online subsidiary of Emigrant Bank. I know that there are branch locations in NYC, but I believe the physical bank has no relation to its online counterpart. Prior to the economy bust, EmigrantDirect offered some of the highest interest rates in the country. Its money market rate is currently at 1.65%. Its web interface is nothing spectacular, although it is functional. Transfers also take 3-4 business days to process. Overall, decent service.

Summary

Any of the aforementioned four online banks are a decent bet to start some savings. If you have extra unneeded cash, you could stash it in one of the CD’s that these banks offer. Remember that these interest rates change on a daily basis, so don’t make your decision solely on the numbers. The customer service on all of these banks are reliable; they reply in a timely fashion. However, don’t expect the level of service you’d get from a physical bank. These are no-risk opportunities to help build your bank; they won’t make you rich, but will certainly add to your savings.

While you can invest this excess green in the stock market, bonds, mutual funds, or any other venture that might promise huge returns, I find that this is impractical for the majority of us for a number of reasons:

1. Unless you had a career prior to medical school, the amount you’d be able to invest off of a resident’s salary is not sufficient to offset any transaction fees, no matter how little your broker charges. Scottrade used to charge $8 per trade. If you’re putting green into the market monthly, you’re incurring a minimum of $96 a year in commission. Try to make that back in this bear market.
2. If you’re working 80 hours a week, you have no time to research your investments. If you’re already economically savvy, go for it. Most of us need to sleep or study for our job.
3. You might actually need the extra cash sometime. You can’t pull out your money in a pinch if it’s invested in the market.

The alternative to investing it is a no-brainer: stash it in the bank. Which bank? The short answer is an online bank. Current interest rates are a pittance, and most banks with a physical branch offer <0.50% rates on their savings accounts. Online banks offer slightly better rates, and are nearly as convenient if you can coordinate them appropriately. There are dozens to choose from, and most of them are generally reliable. Etrade and INGDirect are two institutions that offer online banking.  Stay tuned for my upcoming review of my experiences with various online banks.

]]> http://ophthosurgery.com/2009/05/where-should-a-medical-resident-stash-his-cash/feed/ 0