I have a comprehensive financial plan and look to have up to 48k in about one years time saved. With 16k on hand after paying off my student loans this October which will likely start the one year plan.
I want to use the money to put 20% down on a house (plus have an emergency fund)
Outside of say a high interest savings account such as Ally, is there anything else I can do with the money I have on hand now, or is that the best option?
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If you need to stay nearly-liquid, another option through Ally is the No-Penalty CD.
Withdraw your full balance and interest earned any time after the first 6 days of funding your CD.
Current rates are 4.55% APY, vs just 4% for just their Savings Account.
Speaking personally, I had 0 trouble at all with dissolving the no penalty CD exactly as-stated.
For the bank, what is the benefit of having a no-penalty CD? I thought the whole point of a CD, for a bank, is that the bank has access to that money for a guaranteed period of time.
You have lots of options:
- Treasuries like t-bills and TIPS
- ibonds
- CDs
- money market funds
Each of those are very liquid and low risk, though ibonds have a 1-year minimum holding period and most CDs have penalties for early redemption (doesn’t apply to brokered CDs).
But the simplest option is to stick with a high yield savings account like Ally offers, or maybe a money market account (Ally offers one, many other banks do as well) or money market fund (pretty much any brokerage offers these). Those will keep your money very liquid, are dead simple, and you’ll probably get like 80% of the interest compared to other options.
CIT Bank has a 5.0% APY savings account as long as you put at least $5k in. No reason to do a CD or put money in stocks when your time horizon is so short and the rates on HYSAs are so favorable.
The only small catch is that HYSA interest rates are variable and could potentially decline compared to a CD with a locked in rate over the same time frame. But for only a few grand invested, either option is a ‘good’ choice.
The high yield savings account is such a good option due to FDIC coverage + total liquidity AND SIMPLICITY since you need the money soon.
I personally wouldn’t (and don’t) complicate it trying to squeeze an extra $100 per year in interest. Your time and peace of mind are worth more than that.
You sound young, so you should accept more risk in your portfolio. Stocks or an index fund would be a good idea
It depends on @[email protected]’s timeline for the house. If it’s just a someday plan with no specific date, then yes more risky investments would probably be a good idea for at least some of the money. If the plan is to buy something in the next couple of years, then the less risky HYSA/CD/money market/bonds suggestions would be better.
The earliest is in a year, the latest is 3, so I’m going lower risk with anything in the down payment range but high risk for everything over that +efund
