Where is the best place to stash your savings? Under your mattress? In a cookie jar? Your checking account? Savings account? Certificate of Deposit? With so many choices, it's easy to throw up your hands and take the path of least resistance, which can end up costing you money.
It also doesn't help that recent interest rate cuts are making it more difficult to find good rates of return on your money. Nevertheless, this isn't a time to abandon your emergency fund just because the rates are low. Your goal should be to maximize returns while maintaining the liquidity you need.
There are five common places that people use to manage their short-term savings:
It also doesn't help that recent interest rate cuts are making it more difficult to find good rates of return on your money. Nevertheless, this isn't a time to abandon your emergency fund just because the rates are low. Your goal should be to maximize returns while maintaining the liquidity you need.
There are five common places that people use to manage their short-term savings:
- Checking Accounts
- Savings Accounts
- Money Markets
- Certificates of Deposit
- Savings Bonds
We keep a significant amount in a state and federal tax exempt fund. One with zero fees that eat into earnings. Ours gets an infusion automatically each month from our checking accounts and no postage or forms, checks or time in transit to eat into earnings.
When our house was paid off about twenty years ago, we started this to have money for the annual tax bill and emergency repairs. It is now large enough that it is used to replace worn out cars with the one payment plan. It is a small but essential part of our money management. By being able to write a check on these funds we have flexibility and stil get more than 4% earnings with no loss to the tax man.
As a long time user of this scheme we bought some shares in the fund a year ago, so we have part ownership in the parent company. Very small part, unfortunatly.
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