Are there ways to invest money that yield meaningful interest rates and from which you can withdraw money at will?
Define “meaningful interest rates”.
Interest rates that in your opinion make it worth whatever effort, rigmarole, fees, or whatever else, may be involved.
BTW apologies for the title of this thread–I was in the middle of writing it when I was interrupted, then forgot I was in the middle of it, and hit post.
Not under the current market conditions, which are influenced significantly by the Fed’s policies.
I’m interested in the answer to this as well. The best interest rates I’ve found, even on CDs, are about one percent. My guess is these crappy interest rates are part of the reason why the stock market is at or near all-time highs, since people have to invest their money someplace.
No.
You can have high returns, low risk, or convenience, but you can’t have all three at once.
Okay, how about this.
We have about three months of income saved. If we needed to tap into that, it wouldn’t be anything we’d need any sooner than a month after realizing we needed it. Where can I stick $12,000 that might not let me withdraw at will, but I could take it out on a month’s notice? Is that a thing?
You can stick in in a certificate of deposit. If you need the money before the CD matures, I think the penalty is only a few months interest.
To elaborate a tad, here’s more or less how it works:
You can have high return investments, but they’re more than likely very risky, or they’re very inconvenient.
You can have convenient investments, but they’re likely low interest rate and/or low risk.
You can have low risk investments, but they’re not going to give you much money and/or may be inconvenient.
Doing currency futures is high-risk, can be high return, and is convenient. Putting your money in T-Bills or savings bonds is low-risk and convenient, but low return as well. Putting your money in a long-term CD is inconvenient, low risk and moderate to low return.
Right now, you’re unlikely to get a return on something like 3 months of income that’s worth the trouble; It’s somewhere around 1% for a 1 year CD, and that’ll give you $100 in investment income after your year is up on a 10,000 investment. Whoo!
Makes sense.
I have this idea that one shouldn’t just sit on money but “put it to work.” The standard “emergency fund” is an exception to this as relatively quick access is needed for that.
We’ve got about four hundred dollars a month that we can keep stashing away each month. That’s “saving up for a down payment on a house” money right now. Ideally, that’d be between two or three years. I am wondering, now, (after reading the above), whether that should just be kept in a savings account with no real interest rate, or whether there’s some other option for that.
Anyway, then after we get situated in a house, I’ll be wondering what to do with the monthly marginal add-to-the-stash money then.
Just, basically, I’m trying to ask, what do grownups do with the money they have but don’t need right now?
Your emergency fund is for emergencies, not making money. Just keep it in a savings account.
Once you’ve got an emergency fund established, and you have additional income on top of your expenses, you’ll want to look at retirement accounts. Does your employer offer a 401(k)? Max it out. Depending on your retirement goals and current income levels you may also want to look at a IRA. There are calculators on various sites that can help you figure that out.
After you’ve got your emergency fund, retirement account(s), and daily expenses covered, you can start thinking about other kinds of investment. I am a big fan of index funds, which give you some nice broad diversification in equities for cheap. I’m also a fan of the target retirement ratio strategy, where you gradually shift your holdings from equities to low-risk bonds as you age. Equities have the best long-term returns, but you don’t want to get stuck on a down cycle when you’re about to retire. Bonds will pay less but are more stable over the short term.
Check, check and check, (though arguably I should make the emergency fund more than just three months). Like I said, now the monthly margin is going to a vague “saving up for a house” fund, but I’m wondering (since that’s at least two years in the future anyway) if there’s something else I should be doing with it until that time.
If your emergency fund isn’t a super-fast emergency fund, I don’t see why you couldn’t have your 3 months of income set up in an S&P 500 fund in a Vanguard account. You could keep some money in savings, but the bulk in that S&P 500 fund making basically what the market makes. Then when you turn out to need the money you can sell the S&P500 fund, and that money would be in your checking account in a week or so.
I have an interest-bearing checking at Harborstone Credit Union that pays 3% on up to $20,000 in deposits. That’s meaningful and there’s no minimum to earn it - you do need a direct deposit and enough debits each month. That should meet your $12,000 emergency fund requirement - in fact, that’s exactly how I use my account.
And you can have one of these accounts per SSN, so you could have accounts for a spouse, kids, etc.
Hello 2008!