Finance Park

Friday, April 2, 2010

Where to Park Your Short Term Cash

Power Vegetables In A Drink

Click this now

You have 6 months saved for your emergency fund earning a robust 1% interest. You think there's got to be a better way to earn more interest. You turn to Cd rates, but the prospects of tying your emergency money up for 2 years for an extra 1% return aren't an option.

Desperate times call for desperate measures. It's time to go shopping (for better returns on your money that is!)

Credit unions and community banks

Contrary to popular belief, in most cases you don't have to belong to a union to take advantage of their specials and rates. In some instances, you can earn up to 5.5% on balances on amounts up to $35,000 by banking with small credit unions and community banks.

Credit unions and small banks are in stiff competition with the national chains for deposits. On average, they currently offer higher yields than large banks on deposits and lower rates on loans and credit cards. You may also received reduced fees on bounced checks and overdraft protection.

Finding a high yielding savings or checking account

High yielding checking and savings accounts are available at some banks. Yes, there can be restrictions and residency eligibility. Rates can vary, and are subject to change as well.

In most cases, you will have to make direct deposits, use their debit card 10 to 15 times per month, receive E-statements as well as use their online bill pay system.

Failure to meet these minimums and your rate may drop to 0. You will have to do some research online to find a deal which is appropriate for your situation.

When I first opened an account with Malvern Federal (www.malvernfederal.com), they had a fantastic rate of 5.5%. However, the rate dropped to a still respectable 1.98% 3 months later.

Here are their restrictions:

1) Use of their debit card a minimum of 10 times per month. To make sure I reach this requirement, I make sure I purchase gas in $5.00 increments during the month. Add in some purchases at the grocery store and getting to 10 transactions usually isn't a problem by the middle of the month.

2) Direct deposit/Direct bill pay-Simply have your paycheck directly deposited or use Malvern Federal's direct bill pay system.

Create a CD Ladder

For sums above $50,000, CDS and money markets accounts still offer the best combination of safety and yield. A good way to invest in a CD is to create a ladder of CDs with maturities that range from 1 and go up to up five years.

This will enable you to take advantage of higher rates when you reinvest your shorter-maturity CDs, while still earning higher yields on longer-term CDs.

A little more Risk, a little More Reward

No uninsured financial instrument is bulletproof. Some short-term bond funds lost more than 20% last year. For the most part, the types of funds are designed to yield a few percentage points more than certificates of deposit and money-market funds.

However, they do tend to experience great swings in net asset value (or NAV, a fund's share price). As credit conditions improve, these funds have done very well this year.

Ginnie Mae funds

Technically, you can't call Ginnie Mae funds cash substitutes, but they are very close to it. Ginnie Mae funds own packages of home mortgages.

These funds kept their value through the financial crisis. That shouldn't come as a surprise because Ginnie Maes are backed by the full faith and credit of the U.S. Government, making them much sounder than other mortgage-related investments.

Check out the Vanguard GNMA fund. This fund did very well last year in 2008, returning a little more than 7%.

If you're not out to find the next Google, or gamble to reach out for double digit returns, check out some of the above options. They will keep your emergency fund safer than the roller coaster stock market.

Larry Lane is the editor for InvestorZoo.com a social network dedicated to personal finance. Always consult a qualified financial professional before investing.

The article above is information of a general nature and the information provided may not apply to your personal situation. Please consult your financial planner or licensed professional for investment advice.

Larry Lane is the editor for http://www.InvestorZoo.com a social networking site specializing in personal finance.

Check Investorzoo out for deals on credit cards, high yield checking accounts, blogs, and as well as CDs.

Are you a financial professional looking to help people with money issues and gain world wide exposure? InvestorZoo.com is the 1st true social network dedicated to the world of personal finance.

Answer questions on our public forums, receive leads and start a profile. We are accepting profiles from any licensed professional (in good FINRA standing) or published financial author.

If you have questions, please reach me at larry.lane@investorzoo.com

Article Source: http://EzineArticles.com/?expert=Lawrence_J_Lane

Labels: finance park, park cash, your park