Where to park your cash

Posted by admin on March 4, 2009

While you are parking cash in your 401-K and in savings for your emergency fund and 3 to 6 months worth of expenses the question especially now comes up where should you keep your cash. 

All 401-K’s offer a Money Market Fund or a so called Stable Value Fund.  These are funds that keep a value of $1.00 per share and invest in short term highly liquid securities that pay interest.  Most money market funds invest in short term government securities like Treasury bills, short term commercial paper, or sometimes even short term bank CD’s.  This is where you should put your money when a market breaks an uptrend or when you feel you have to much exposure to the stock market.

If you are looking for a savings account for your emergency fund then you should use the bank where you have your checking account for the convenience and ease of getting at the money.  You should have it tied to your debit card so that if you ever need it you can get it from an ATM 24 hours a day.

If you are saving 3-6 months worth of expenses or even better saving for a large purchase like a car or home that you plan on buying in the near future then I think you need to pick either a short term CD or a High Yield Savings accounts to get the most out of your money that is just sitting there. 

There are some great online banks that offer good rates on both CD’s and savings accounts, but the best place to start looking for rates is Bankrate or www.emoneycentral.com.  There is also a new website that apparently is like LendingTree for savers.  It is called www.MoneyAisle.com and apparently you can go to their site and input how much you have to put in an account or CD.  They have banks bid and offer a rate for your money.  You can do a test bid at their site and see how it works.

 You have to have a minimum of $1,000 to use their service.  When you input your information you will get an offer that lasts for 30 minutes.  If anyone uses it please leave a comment and let me know how it works for you.  Some other popular savings accounts are WTDirect, HSBC Direct, Etrade Financial, FNBO Direct, and ING Direct.  Check out their rates and see which ones might be best for you.

Look around and see what kind of rates are out there.  Just remember if you have 3-6 months of expenses you are looking at between $9,000 to $20,000.  You at least want to be earning something on these funds.