CD or High Yield Savings

**disneysteve** · 07-26-2009, 07:20 AM

I think it is a good idea to do a CD for a higher rate if you won't need this money for 3-5 years. However, if the $1,000 in the CU account is your only EF, I wouldn't put all of the $5,500 in a CD, or I'd ladder a few CDs so that one comes due every 30 days, since that would really be part of your EF.

**skives** · 07-26-2009, 07:32 AM

I live with my parents right now and plan to for the next 3 years. The only things that could possibly come up are car fixes, which I actually try to pay without my EF if possible.

**skives** · 07-26-2009, 07:35 AM

Ally Bank has a 3 year CD at 2.66% or a 9 month no penalty CD at 1.88%

**disneysteve** · 07-26-2009, 07:47 AM

Would your parents cover all of your expenses if you were to become unemployed? Do you have car payments? What about health insurance premiums? Any other debt payments (student loans, credit cards, etc.)? Your EF needs to cover all of your living expenses that would still need to be paid if you were to lose your income. Your EF also needs to cover things that come up even while you still have your income. What if your car is in an accident? Do you have money set aside to cover your deductible? What about if the car needs to be replaced? Do you have savings to cover another car, or at least a downpayment?

If your parents would be willing and able to cover all of your expenses in an emergency, that's terrific and your EF doesn't need to be that large.

As for the CD, I would not tie up my money for 3 years right now. First, interest rates may change and you don't want to miss out on rising rates. Second, your life circumstances can change dramatically in 3 years when you are young. What if you meet someone 6 months from now and 18 months from now you are married and out on your own? You might wish you hadn't tied up a bunch of money in a 3-year CD. I would go shorter term, probably 12 months max. As for the no-penalty CD, I assume that means you can cash it out at any time without a penalty. There is probably a lower rate to compensate for that. Look around and see what other banks are paying for 9 months with the usual CD terms (penalty for early withdrawal).

**skives** · 07-26-2009, 11:16 AM

Has anyone heard of these banks for CD's

newdominionDIRECT.com

Aurora Bank, FSB

UmbrellaBank.com

giantbank.com

**disneysteve** · 07-26-2009, 12:02 PM

Not familiar with any of them, but as long as they are FDIC-insured, I would not hesitate to do business with them if they are offering market-topping rates.

**xpirtdesign** · 07-27-2009, 10:40 AM

Yeah you should do a little research on those companies before you trust them with your money. But if their rates are good then yeah go for it!

CD or High Yield Savings