Author Topic: Where to put savings that will be needed soon?  (Read 1715 times)

marcela

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Where to put savings that will be needed soon?
« on: February 13, 2015, 06:58:03 AM »
My husband and I have been saving up for various post-school goals and I'm trying to figure out where to put that money until we need it. We have around $20,000 in my savings account gaining .25% interest and another $10,000 or so in a money market account. Our retirement savings are separate from this money and are in ROTH accounts. My husband is in school for another 2.5 years and after he graduates the plan is to start a family and probably pretty soon after that buy a house. It feels silly to have so much money sitting in an account where I can't really put it to work, but we know we'll need to have ready cash on hand for down payments and baby costs..etc.
Should I leave the money where it is or move it somewhere it can work a little harder for me?

Thanks!

JLee

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Re: Where to put savings that will be needed soon?
« Reply #1 on: February 13, 2015, 07:58:16 AM »
If I'm reading the numbers right, you're talking at least three, if not four years out? For that length of time I'd be considering a conservative investment account, but I'll let the more experienced chime in.

humblefi

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Re: Where to put savings that will be needed soon?
« Reply #2 on: February 13, 2015, 07:59:56 AM »
Depending on when you want the money back, there are a couple of options in order of risk (lower to higher)

1.
If you want to retain it as cash (say for an emergency fund), then I would explore FDIC insured online banks which pay a higher interest rate.
+ Smarty Pig
+ Ally Bank
+ Capital one 360

2.
If you would not need it for the next 5 years or so and would not like to take a loss of principal, I would explore US Govt bonds. A recent article I read is at: http://www.kiplinger.com/article/investing/T052-C000-S001-what-you-need-to-know-about-u-s-savings-bonds.html.

3.
If you are okay with some risk of principal loss, I would explore short term bond funds from Vanguard OR a very conservative stock fund. But loss of principal is a risk.
For example, a muni fund would give you income, federal and in some states, state tax free as well. But, there may be loss of principal if the bond market takes a dip.

Hope that helps.

Slowdown

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Re: Where to put savings that will be needed soon?
« Reply #3 on: February 13, 2015, 08:00:22 AM »
You should receive around 1% interest on an ordinary MMA- or savings account. Compare rates here: http://www.bankrate.com/compare-rates.aspx. Not much but at least better than .25%!
Best regards,
Slowdown

CorpRaider

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Re: Where to put savings that will be needed soon?
« Reply #4 on: February 13, 2015, 08:26:11 AM »
Check out Series I savings bonds.  You can only buy $10K per year per SS# but you could get there pretty quickly with two of you.

ralfeg7

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Re: Where to put savings that will be needed soon?
« Reply #5 on: February 13, 2015, 08:42:47 AM »
Honestly I would consider an account with Vanguard in the VOO fund. It tracks the S&P 500. the S&P has grown at an average rate of around 11% for the last 75 years. Plus the fund pays about 2% dividends.

This does carry risk, if the stock market dips then you may be out some cash. However, in my opinion the risk is pretty minimal and the opportunity is pretty good. Why keep your money in 1% account when you have a pretty low risk option to make a decent return.

Another alternative is to try and find a credit union. My credit union is paying 3% on balances up to 10,000. You have to make x number of purchases and that kind of thing but as long as you use it for your normal expenses you can end up with a nice amount of interest on that portion.

moustache1979

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Re: Where to put savings that will be needed soon?
« Reply #6 on: February 13, 2015, 08:45:11 AM »
I would Suggest Barclays USA for savings and CD's

Savings AC = 1%
5yr CD was = 2.25% at last check

Series I bonds are good too but depends on inflation