Author Topic: Where to Put the Short-Term 'Stache  (Read 1836 times)

Phostare

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Where to Put the Short-Term 'Stache
« on: July 26, 2014, 06:18:26 AM »
Hi everyone,

Long-time reader, first-time poster here.  My question relates to how to handle short-to-medium-term savings.

My wife and I are good savers, and in addition to modest retirement savings, we are making good progress towards a down payment for our first home and a new (used) car each month.  In both cases, we don't have a particular date set for either purchase; however, both purchases are likely on the 1-3 year horizon as our family will hopefully grow.

Where do you all suggest we park these funds as we both wait and continue to save?  Would you place them in a taxable balanced or bond fund?  Leave them at the bank?  As an aside, we're in the 15% tax bracket, so I believe that would relieve some burden on taxable gains in the short term.  Generally, we have a high tolerance for risk, but with these funds I imagine it being a bit different.  Our mentality is basically: "We don't need them until we need them, but when we do, we'll need them with a month or two."

Thanks for any resources or advice you all can provide!

JGB

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Re: Where to Put the Short-Term 'Stache
« Reply #1 on: July 26, 2014, 06:27:10 AM »
How much of a problem would it be for you if your plans for this money were delayed?

It's a personal preference based on that question and deciding the right balance in risk vs reward. For my part, I generally fall in the higher-risk-more-reward camp, so I would sick the funds into the Market (probably in VTSAX), but if you do so, know that it could result in a timeline that differs from your estimate. To me, it sounds like you have enough flexibility to take that approach.

matchewed

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Re: Where to Put the Short-Term 'Stache
« Reply #2 on: July 26, 2014, 06:38:45 AM »
Bank via a CD or savings account. Low risk and high liquidity is what you need for your particular goals. 1-3 years is too short term for the volatility you'll see in stocks and with (probable) rising interest rates bonds are going to be tough.

JGB

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Re: Where to Put the Short-Term 'Stache
« Reply #3 on: July 26, 2014, 11:25:16 AM »
If the 1 to 3 year timeframe was a solid limit, I would agree. That's why I asked the question I asked. The impression I got reading the post was that this was a fairly flexible time window. If that is the case, I stand by my recommendation of sticking it in the market.

If that is not the case, another vehicle is a better choice. Even in that case, I would try to find something better than the miniscule returns you will get from a savings account or CD... Though that depends a bit on what rates you can find.

surfhb

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Re: Where to Put the Short-Term 'Stache
« Reply #4 on: July 26, 2014, 11:42:12 AM »
You need to ask yourself if the risk of putting it in a market which MAY OR MAY NOT increase is worth the payback within that timeframe.    Also remember this cash is working for you already since it's going towards your future home.   

Keep it in a regular savings or CD

Pinkie Mustache

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Re: Where to Put the Short-Term 'Stache
« Reply #5 on: July 27, 2014, 08:50:06 AM »
Was just in a similar situation, only the timeline is a year or less.  We did what would be the equivalent of a CD.