Posted: 12/14/2013 6:28:00 AM EDT
|
I have a local credit union account where I have $200 each month put into via direct deposit before the money goes into my normal checking account at Wells Fargo. I also have a savings account for saving for big purchases at Wells Fargo, as well as a Brokerage account there, and one credit card which is used for the extensive travel I have to do due to my kidney disease. That will be paid completely off here as soon as the next reimbursement check comes in in a couple weeks. I am putting $100 a month into the brokerage account right now, and plan to boost that when everything but the house and car are paid.
I do have some other debts, which are personal loans, and and a student loan which are set to be paid off within 3 years. Then I have a mortgage and car payment. Everything gets paid on time, and there is still plenty of money at the end of the month. I am not wanting to debate that. My question is in regards to the CD rates and information the credit union has. The money there is for SHTF, and it has not been touched since we closed on the house a couple months ago. I was thinking about opening up a long term low volume CD with some money just to boost the dividends a little bit. I would consider the dividents be paid back to the account at the end of each month. Here is what the information page says about them. 3 Months Minimum $7,500.00 6 Months Minimum $10,000.00 9 Months Minimum $10,000.00 12 Months Minimum $5,000. 00 24 Months Minimum $5,000.00 30 Months Minimum $1,000.00 36 Months Minimum $500. 00 Certificate dividends can be paid back to your certificate or your share savings account monthly and you can request that your dividends be sent to you by check Term Share rates are determined each Tuesday. The rate you are quoted at the time you receive your certificate is the rate you receive for the duration of the certificate. A penalty will be assessed on all term share certificates withdrawn before the maturity date. The penalty will be in accordance with the instructions on the certificate. The current rate of the last 4 options are .285%, which I realize is not great at all, but better than the .15% that the account is currently gaining. I also like the idea that I still have access to the money should SHTF. Even though I would be taking a penalty. The other notes are .180 interest. Any thoughts? |
|
Wow, 0.285% for 3 years? Take a look at ally.com. You can throw all that money in a savings account and earn 0.85% interest and not have any of it tied up in a CD. Their checking account rate is very good too, and theirs CDs are even better:
9 month 0.64 % 12 month 0.95 % 18 month 0.94 % 3 year 1.19 % 5 year 1.59 % |
|
Sorry, Well, it sounds like this is your emergency fund.
Interest in the less than 1 percent range is not worth chasing one way or the other really. You're still in the range of losing value to inflation. So you are in effect paying for peace of mind. Even if you invested big money like 10,000 or more you're yearly return at less than one percent is still less than 100 dollars. I didn't see what the surrender charges were but I guarantee when you do need this money early they'll take more than the potential returns you'ld make in interest in 3 years. I dont think CD's make sense ever. I just park short term money (less than 5 years) in savings accounts or money markets. A money market may even have better interest than what you quoted, but again, its not worth making a bunch of phone calls over because you'ld make more money working that time extra at your day-job. Another thing you didn't ask about, but might be worth checking into: I've heard nothing but horror stories from people I know that have done their investing (in stock/bond market) through mortgage banks like wells fargo or Bank of America. I'ld check the fees and prices you're getting and then call around. Its not their primary game, their only real draw is the convenience of having a bunch of accounts at the one place. You may be getting hosed. |
|
Keep in mind, your taxed on the interests you earn on your CDs.
With that said, i do have CDs, they work for what I need them to do. The only way to make them worth is long term, esp. when CDs are going lower and lower. Ive got one CD locked in at 3.68%, i wish they had those rates today, but that CD is at that rate a couple years ago from a starting point of 8% 20years ago. The only advantage to CDs is they are fairly "Liquid" , usually the only penalty for early withdrawal is you lose that years interests (atleast at CU its that way). |
| I'd park the money in a NTF mutual fund. Most funds won't charge you anything to sell after 90 days and if you need the money before that you didn't need to put it in anything at all. You'll most likely make more money off the dividend payments alone than you will anywhere else right now. There is some risk being the market and all, but if you want the money to actually grow and hope to keep pace with inflation, it really is the best option right now. |
|
I had a CD ladder at USAA which I worked out of due to low interest rates.
If you think you need the money quickly, with no risk, drop it in Ally or PenFed. Or call your current bank and ask them to match Ally's rate -- it can't hurt to ask. For mid-term savings (maybe a 5 year time horizon), it might be appropriate to mix in a bond fund (high quality/shorter term) or even a large-cap value stock fund. |
|
You said you didn't want to debate it but I am having are hard time understanding why you want to have this money in a CD or something like that earning such a crappy rate when you are surely paying a higher rate on your personal loans, car loans, student loans, etc. Why not pay the money towards your debt with the highest interest rate? That would be your best return.
There are people that like debt and people like me that hate it. The people that like it often say they borrow money for cheap and invest it and make money on the spread. For example borrow money at 5% and invest it earning 10%. I think that is risky but at least that math could work. In your scenario with sub 1% rates I don't think anyone would recommend keeping the debt to earn that. |
|
Quoted:
You said you didn't want to debate it but I am having are hard time understanding why you want to have this money in a CD or something like that earning such a crappy rate when you are surely paying a higher rate on your personal loans, car loans, student loans, etc. Why not pay the money towards your debt with the highest interest rate? That would be your best return. There are people that like debt and people like me that hate it. The people that like it often say they borrow money for cheap and invest it and make money on the spread. For example borrow money at 5% and invest it earning 10%. I think that is risky but at least that math could work. In your scenario with sub 1% rates I don't think anyone would recommend keeping the debt to earn that. No, not really wanting to change my plan. I have lived most of my entire adult life living paycheck to paycheck. Since I have been married, and needing a second kidney transplant this year (finally got one on Thanksgiving Day), I realized my priorities are to take care of myself and family first, even if that means taking a little longer to pay off my debts from my less intelligent years. Now I make sure I put away money each paycheck for emergencies. I have a plan to have everything paid off within 3 years minus the mortgage and maybe the car. I can live with that and still put money away each paycheck. That to me is more important than sacraficing enjoying my life with my family to get out of debt completely 6 months sooner. I have listened to Dave Ramsey even, and if it weren't for him, I would not be where I am not. On November 6, 2012, I made a commitment to take care of this. I have done well so far, and have made BIG improvements in the last year, so I am doing the best I can. One person's plan may not work for the next person the same way, and everyone's life is different. |
|
Quoted:
CDs are old school. you can easily earn 4-5% in a variety of dividend paying stocks if you are willing to take a little risk. big blue chips, mlps, utilities are pretty safe in downturns too I am doing research in this area as well. I am starting small with my investments now anyway, but I am planning to keep as low risk as possible until more debt gets paid off. |