Really clueless here

[happygirl]

Hello everyone. This is my first post and it probably seems really elementary to most of you, but here goes:

I have 20k I'd like to put away for 3-5 years, so I'm thinking a CD or a money market account. I want something very low risk since this is my first step into the investment world, but of course I'd like the highest return possible. I don't need to access this money since it's not part of my emergency fund, but you never know what might come up either.

I was thinking I'd call the local banks and ask what their rates are. I don't really do online banking since I don't understand it. Does anyone have any suggestions or helpful hints for me?

This whole investment thing is new to me, so I'm really clueless. Thanks in advance!

[disneysteve]

Welcome. I think you are on the right track. Money that will be needed in 3-5 years needs to be somewhere safe and secure. I would go with a CD (or more likely several CDs) rather than a Money Market Account (MMA). Here's why. A MMA has a variable interest rate. Also, the rate is typically lower than a CD which is the price you pay for being able to access your money freely. A CD will usually pay a higher rate since you are locking up your money for a set period of time.

With 20K, I'd suggest splitting the money up and laddering, meaning buying CDs of varying terms. The longer the term, to some extent, the higher the rate, though that isn't always true. Also, interest rates look to be on the rise so you don't want to throw all 20K into a 5-year CD right now. You'll probably miss out on higher rates down the line.

Maybe buy a 6-month, 1-year, 18-month and 2-year CD now. That means every 6 months, you have one coming due that you can roll over at the prevailing rate at that time. That also gives you access to part of your money every 6 months just in case something does come up before the 3-5 years are up.

As for online banking, there is not really anything to understand. Banks are banks. Some do business down the road from your home and you can walk in and buy the CD in person. Others do business on the internet and you can mail in your deposit or have it transferred electronically from your bank account. Typically, though not always, online banks will pay higher rates because they have lower expenses. Go to bankrate.com to search for the best CD rates, but still check your local banks because they may have specials or promotional rates that beat the national best.

[happygirl]

Thanks for your reply. The ladder idea makes sense.

This will probably sound silly to you, but here's my online banking question: Suppose I find a bank online with a CD rate I like. How do I physically get my money from the savings account it's currently sitting in to the online bank? Do I take it out as a cashier's check, then mail it in to the online bank's address? The money is currently in a rather local, small bank.

Thanks again!

[kork13]

Suppose I find a bank online with a CD rate I like. How do I physically get my money from the savings account it's currently sitting in to the online bank? Do I take it out as a cashier's check, then mail it in to the online bank's address? The money is currently in a rather local, small bank.

It's even simpler than that -- If you provide the online bank with the name, routing number, and account number for your savings account, they should be able to draft it electronically. If for some reason that is not an option (a rare situation anymore), the method you stated will also work. The online bank would provide you a mailing address for you to send it to.

[maat55]

You can do online transfers from your bank to the online bank. You can create the account online and they will do a practice run by depositing some change then removing it and you will varify the amounts.

I did my first transfer with 10.00 to make sure I understood the process.

There are a list of some of the highest paying high yield savings accounts at the top of this thread catagory. Good luck.

[happygirl]

Don't I feel silly. I had no idea you could do that. I like the idea of trying it with 10.00 first to make sure it works.

I really appreciate the input. I'd like to get this accomplished soon so I'll start my research in the next few days. Thanks!

[creditcardfree]

It's even simpler than that -- If you provide the online bank with the name, routing number, and account number for your savings account, they should be able to draft it electronically. If for some reason that is not an option (a rare situation anymore), the method you stated will also work. The online bank would provide you a mailing address for you to send it to.

FYI...a routing number is the 9 digit number that identifies your bank. It is the first 9 numbers on the bottom of your check. You can call your bank to verify or ask for this information as well. They will know exactly what you are looking for.

Good luck!

[canadamom]

Also call banks that are smaller but yet FDIC insured like banks in grocery stores. Sometimes they have a great deal better than a bank with many locations.

[happygirl]

Insurance guy, This is money I don't feel comfortable tying up for more than maybe 3 years at a time, so I guess I'll stick with the ladder CD idea.

Tell me more about fixed annuity accounts though. I'm mid 40ish so I've got a while till retirement. Would this be worth doing with only maybe 20k or so? I know nothing right now. Please share even the most basic info. Thanks in advance!