Investment question- savings account or ...?

What you have latched onto is probably the best way of saving money. It is called the "McCollough method," after Ernest McCollough who wrote about personal finance and thrift in the early 1930's. The part that you spend (80%) is called the "living income." The portion that is automatically saved (20%) never appears on your monthly budget and, like taxes, you try to forget that it was ever a part of your income. You learn to get by on the living income, and your savings continues to grow.

I would recommend the savings account. Given a choice, I would choose the old-fashioned "passbook" savings account, where the only way to withdraw money is to present the physical passbook to a bank teller during banking hours. This reduces the your ability to spend the money on a whim.

Don't worry right now about the interest you earn in the savings account; interest rates are so low that no type of deposit account will offer a decent interest rate. (There are some exceptions. Local co-operative banks or credit unions could have interest rates up to 4 or 5% on certain accounts.) Speaking of banks, I would open the savings account at a local bank rather than one of the big national banks. They simply tend to treat their customers better.

Once your savings account has accumulated a decent amount of money (say $1,000) you can think about where to invest some of that money for a higher return. You could consider buying a corporate bond, or investing the money into a bank CD (certificate of deposit), or a mutual fund. A good bank will have somebody who can offer you information about these different options. Bear in mind that any form of investment with a higher interest rate will mean tying your money up for a period of time. This means that you should always leave enough in your savings account to cover emergencies, while the rest is invested in higher-yielding assets or securities.

Good luck!

Look for a money market account with a $0 minimum investment. You could get a better return than a passbook savings or checking account. Or a mutual fund with a low minumum/no minimum investment. There are funds that allow you to invest weekly or monthly.

I think u should open an online savings account because of high interest rate returns on ur savings (I highly suggest ING direct or american express). Those online banks give u the option to do automatic transfers. If you want to save with one of those banks send me ur email address because there are promotions that will benefit you.

Savings account

Yes, open a companion savings with an automatic transfer.