The urgency of where to save you money is as important now as it ever has been. Between the current recession and the turbulent ups and downs of the stock market, many of us have wondered where we can stash our money besides under the mattress until the crisis is over. That decision should be made after you have decided what your goal is with that money. It may be to find the most safety for it, or quickly getting access to it, or maybe finding more interest. Here are a few tips for those looking at those three areas to put their short-term money.
1. If Safety is Your Need For Savings
Many savers are in preservation mode with their savings. They just do not want it to disappear in this market. If that is your goal, you should just drop it in a plain old FDIC insured savings or money market account. As long as your investment is only $250,000 or less your account is insured by the FDIC. If we have more than that, spread it around to several banking institutions to keep it under the $250,000 ceiling limit.
Several Web sites will help you compare yield rates at different banks. By shopping around you could get a great rate and your money will be safe. Money market accounts usually have a limit on the transactions they let you make each month and there usually a minimum balance requirement. The important part of this is to make sure that the institution that you are dealing with is FDIC insured. After all the goal is to safely keep your money while weathering the economic storms.
2. If Swift Access is Your Need For Savings
Having your money available at a moment’s notice is important for some savers. Many money markets from mutual-fund companies or brokerage firms can give you that access. Most of these funds invest in highly liquid securities such as CD’s, government debt and commercial paper. If an emergency arises while invested in a mutual fund, you can usually write a check that is tied to that account.
Beware that money market funds unlike banks and savings and loans are not FDIC insured. However, since these are short maturities on the securities of these funds, they are relatively safe to invest.
3. If Extra Interest is Your Need For Savings
To get that extra interest you need to understand that there will be a bit more risk in your investment. Usually you will make this investment decision if you looking to use the money in a couple of years, because it may be volatile in the short term.
One strategy is to make an equal investment in no-load short-term bond funds and bank loan funds. You will find mutual fund companies sell both. An equal split between these two fund types balances out a savings portfolio. They give the saver two options to depending on how the markets react to the current economy.
4. Before You Begin Your Savings
Before you begin to invest your savings, you should first consider reducing any debt you have. Look to your unsecured debts like credit cards and get them paid off first. Most financial experts will tell you that it makes no sense to invest in savings that pays you single digit interest while paying out double-digit interest on your credit cards.