Author Topic: Where to Stash $4000 in car money for a year?  (Read 2579 times)

frannles

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Where to Stash $4000 in car money for a year?
« on: March 17, 2014, 07:33:55 AM »
Hi all!  I'm looking for advice on where to store $4000 for about a year, give or take some months. 

I am 24 years old - relatively new to investing and the working world - and I have some cash that I'm mostly using to set up Vanguard funds.  However, after setting those up, I have about $4000 "left" that I would like to set aside for buying a car when my current one conks out.  I drive a 2002 Chrysler PT Cruiser with 156,000 miles on it.  I take good care of it and I intend to drive it until it can't be driven anymore - I'm guessing that time might come around 200,000 miles.  I bike as often as I can, but my job requires that I have a car for some assignments.  Moreover, I'll be moving across the country this summer and I plan to work in a road trip doing so, racking up about 6,000 miles in the process.

I like to be prepared for worst case scenarios, so I'd like to be able to buy a new car by January 2015 at the very earliest, though again I intend to drive my current car until it totally dies.  (By the way, I'm thinking the next one will be a used Subaru Forrester - I do a lot of camping/road tripping/transportation of heavy gear when I drive - looking to spend around $7K for that car.)

I was looking at CD's but the Vanguard one requires a minimum deposit of $10K.  Money Market funds might be another option, or Treasury Bills, or bonds.  Or should I just throw everything into the Vanguard index funds I'm setting up, to maximize my principal investment, and withdraw whatever amount I'd need when car-buying time comes?

sherr

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Re: Where to Stash $4000 in car money for a year?
« Reply #1 on: March 17, 2014, 08:16:15 AM »
General advice is not to invest anything in stocks / bonds that you'll need short term, and 1 year definitely qualifies as short term. The safe bet would be to figure out where you can get the best rates, CD, Treasury Bills, Money Market, or maybe just a high-interest savings account, and leave the money there.

Regardless of what you do with it, stocks, bonds, anything else, 1 year's interest on $4,000 is not going to be an incredible amount of money, so it's probably not worth gambling on short-term market returns over it. Keep it somewhere safe until you need it.

KingCoin

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Re: Where to Stash $4000 in car money for a year?
« Reply #2 on: March 17, 2014, 08:56:43 AM »
There are a number of threads like this one discussing small variations on the topic like this one:
http://www.mrmoneymustache.com/forum/investor-alley/small-emergency-fund-ally-5-yr-cds-i-bonds/

Long story short: You may be able to find a bank that pays you 2-5% interest on small accounts. However, this will only amount to $80-$200 and will require that you jump through a few hoops (setting up direct deposit or making x charges per month are common ones). It's up to you to decide if it's worth the hassle. Most CDs, treasuries, and money market funds will pay close enough to 0% that it's almost definitely not worth the trouble for a 1yr, $4,000 investment.
« Last Edit: March 17, 2014, 10:03:34 AM by KingCoin »

hodedofome

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Re: Where to Stash $4000 in car money for a year?
« Reply #3 on: March 17, 2014, 09:31:44 AM »
There are a number of threads like this one discussing small variations on the topic like this one:
http://www.mrmoneymustache.com/forum/investor-alley/small-emergency-fund-ally-5-yr-cds-i-bonds/

Long story short: You may be able to find a bank that pays you 2-5% interest on small accounts. However, this will only amount to $80-$200 and will require that you jump through a few hoops (setting up direct deposit or making x charges per month are common ones). It's up to you to decide if it's worth the hassle. Most CDs, treasuries, and money market funds will pay close enough to 0% that it's almost definitely not worth the hassle for a 1yr, $4,000 investment.

Agree, we aren't talking about much money here. Put it in a bank account and go work your tail off at your job. That will pay off far greater than any fund you can think of.