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URL:  http://boards.fool.com/i-am-going-to-put-my-short-term-savings-into-a-16976782.aspx

Subject:  Re: Newbie Advice & IRA Dividends/Gains Question Date:  3/29/2002  5:10 PM
Author:  Mark0Young Number:  34070 of 78166

I am going to put my short term savings into a Money Market Account which is currently paying 3.1% (the best I could find).

Right now that is a good rate for a Money Market Account. My credit union is paying only 1.61%APY on money market accounts with at least $10,000 in that account. (My credit union pays different interest rates for different amounts in the account, and $10K gives the top rate.)

I use my money market account for short-term savings for saving up for the annual property tax bill, my annual Roth IRA contribution, and the more liquid half of my emergency fund. I also have my credit union automatically divert part of each payroll direct deposit into this account so, if I do withdraw from the account (e.g., to pay the property tax bill, or handle a major car repair), the account will automatically be rebuilt.

I'm also considering putting some funds into a 5 year cd with ING direct (5%). I don't see much talk about CDs are they a worthwhile investment or should I put that money somewhere else?

Can you redeem the 5-year CD before maturity? (Some issuers will allow it with penalty, some won't allow it.)

I generally have mixed feelings about CDs--one one hand they do usually give better yields than a money market account or a money market fund. On the other end, CDs generally tend to be inflexable. I used to keep some long-term money and the less liquid half of my emergency fund in CDs, but I have since moved the less liquid half of my emergency fund to I-Bonds (http://www.publicdebt.treas.gov/sav/sbiinvst.htm) and I have moved longer-term money into stock funds and (ahem) bond funds. I still use CDs where I want the money available on a specific date (e.g., I have a couple CDs that mature near January 1 that I can use for a Roth IRA contribution if need be, and in the recent past I have used CDs to boost yields of money I have set aside for property taxes but