Where should I “park” my savings?
In our previous newsletter, we reviewed the need for emergency savings as part of a healthy financial plan. This issue, we want to focus on where to “park” your emergency savings.
As with longer term investments, it is easy to emphasize more on selecting the “best” investment versus actually implementing an investment or savings strategy. In reality the most important step in saving for an emergency fund is STARTING, even if the funds only sit in a savings account. Deciding the best place to “park” the funds to achieve the desired investment return is actually the second most important decision.
Once you have started saving, here are some basic options on where to “park” your savings, beginning with the least complex, least risky, and the lowest potential return:
Bank Savings / Bank Money Market Accounts / Money Market Funds
http://www.bankrate.com/brm/rate/chk_sav_home.asp
http://www.smartmoney.com/consumer/index.cfm?story=20050518
Bank Certificates of Deposit
http://www.bankrate.com/brm/news/sav/20020729a.asp
U.S. Savings Bonds
http://www.kiplinger.com/personalfinance/basics/archives/2003/04/savings6.html
Treasury Bills
http://www.soundmindinvesting.com/visitor/2002/aug/level2.htm
Bond Mutual Funds
http://soundmindinvesting.com/visitor/2004/oct/level2.htm
After reviewing these choices, consider the following to help decide if your current savings plan meets your needs:
Do I have or am I working towards a reasonable amount of emergency savings?
Do I need to make a change where I am investing my savings?
Am I keeping it simple?
When making financial decisions, do not go beyond your comfort zone or expertise without the guidance of a qualified advisor. If you do not have the time or resources to become familiar with the savings options, then stick with what you know and remember that actually having the funds set aside is the most important action.
Planning Tips
Sound Mind Investing (SMI) is a monthly investment newsletter (also available as a subscription website, www.soundmindinvesting.com) offering financial counsel from a Biblical perspective. We consistently recommend their work, and have listed a few of their articles related to our topic:.
SMI Main Saving Page
Build a CD savings ladder
In the News
“Employee Discounts for Everyone” read the latest advertisements from GM with American manufactuers following suit. Anytime prices are dropped and there is competition it is always good for the consumer. Regardless of the deal we all need to make sure our car buying decisions make sense for our financial situation. As well we need to be careful to not abandon common sense in the car buying process just to get a “good deal.” Below is a link to a good Kiplingers article as well as some helpful information from consumer advocate Clark Howard.
Kiplinger's - Wheeling and Dealing (shopping for a new car)
Clark Howard - Buying a new car
Clark Howard - Buying a used car
