What would you do with $4,000, if....

[Mom2Adam]

1. You had no debt, no cc, no loans etc....except Mortgage (please don't tell me to pay down mortgage!).

2. Your income pretty much matches your bills, including gas and grocerys...but leaves nothing for entertainment, clothing, etc.

3. You don't really have an emergency fund, but you do have some cds, bonds etc...

4. You want it to be accessible, but also do something....like earn interest.


I've been looking at ING Direct...around 5% interest - any other options? We want to start 529's but not with this...because we need an emergency fund first! . Thanks for your ideas! (and any experience with ING).

[kanga1622]

If you want to keep it as an emergency fund with ING, it will get a great interest rate (I think it is roughly 4.5% right now). I have never had a problem depositing or withdrawling money from my ING accounts. The only thing is that it takes roughly 3 days for a withdrawl to show up in your linked bank account.

If you don't have any easily accessible emergency fund, I'd put that $4000 in an ING account so it takes some work to withdraw the funds but is still quickly accessed in a true emergency. You might want to put a little aside in a regular savings account just for some "fun" money for the occasional movie or dessert out.

[velochic]

I'd put it in a money market mutual fund, like Vanguard's Prime Money Market Mutual Fund. It's currently yielding 5.1%.

Remember, YIELD is what you are looking for, not APR.

[sanguine_speed]

Originally Posted by Mom2Adam

1. You had no debt, no cc, no loans etc....except Mortgage (please don't tell me to pay down mortgage!).

2. Your income pretty much matches your bills, including gas and grocerys...but leaves nothing for entertainment, clothing, etc.

3. You don't really have an emergency fund, but you do have some cds, bonds etc...

4. You want it to be accessible, but also do something....like earn interest.


I've been looking at ING Direct...around 5% interest - any other options? We want to start 529's but not with this...because we need an emergency fund first! . Thanks for your ideas! (and any experience with ING).

I went to Italy : . Okay, our situations are not identical, but I truly could have been more 'responsible' with the money. But this was a once-in-a-lifetime trip for us and we will cherish it forever. And, we brought a blasocyst home with us .

[cjanelles]

I would probably put 1/2 to 3/4 in an interest-bearing savings account (like the ING account you're referring to) and use the remaining portion to splurge a little bit...like on a new TV for DH.

[LEAW]

I'd put $1000 in a savings acct. linked to the checking acct. you pay your bills. This is the "fast" emergency money for things that must be paid right away.

I'd put $2000 in ING or similar, and let it make a little $, and not be too hard to get.

I'd take that last $1000, spend $100 on a "fun" family night (dinner? movies? something), get some new clothing for everyone (thrift is good, sale is good, I hate to pay full price) and shoes too, basic clothes... jeans, pants, shirts, etc.

If there was still $ left, I'd probably put it in a "fun" acct. to enjoy another time during the year.

[hookahgirl]

Originally Posted by lisa2976

I'd put $1000 in a savings acct. linked to the checking acct. you pay your bills. This is the "fast" emergency money for things that must be paid right away.

I'd put $2000 in ING or similar, and let it make a little $, and not be too hard to get.

I'd take that last $1000, spend $100 on a "fun" family night (dinner? movies? something), get some new clothing for everyone (thrift is good, sale is good, I hate to pay full price) and shoes too, basic clothes... jeans, pants, shirts, etc.

If there was still $ left, I'd probably put it in a "fun" acct. to enjoy another time during the year.

That is exactly what I would do too!!

[shelf]

my immediate thought was fund the IRA for this year. But then I saw you want it to be accessible. I'd probably put it in a money market account so it's earning good interest, but you can withdraw it when needed.

As for the 529s, I'd fund IRAs for myself and the kids can fend for themselves. I'm going to help as much as I can, but it's more important for us to have a retirement. (the kids will understand, I had to borrow student loans and I paid them off and it didn't kill me) As the saying goes, the kids can borrow for college but where are you going to borrow for retirement?

[msjd123]

Originally Posted by velochic

Remember, YIELD is what you are looking for, not APR.

What's the difference?

[velochic]

Originally Posted by msjd123

What's the difference?

In a nutshell, yield will tell you how often the interest will be applied (or compounded). It is best to have an account that compounds the interest DAILY. That's what a money market mutual fund will do (basically every day the stock market is open). A money market mutual fund is a mutual fund with a fixed value of $1 per share and its yield varies based on the markets. But it's a very stable investment (as safe as you can get beyond something FDIC insured) with a very high yield for the risk being taken. Currently Vanguard has MMMFs between 4% - 5+%.

So, to put it in simple terms... if see 12% annual return, you really don't know when they are going to apply the interest to your account. But if you see 12.68% annual yield, you can see that they are going to be applying the interest monthly. You see, the YIELD goes up the more often they compound/apply the interest. If the yield were 12%, it would mean that they compound the interest once a year. It's important that they compound interest more often because each time they do that, the amount that interest is figured on is increased slightly.

Does that make sense?