Where to put $$ you plan to use in a couple of years?

[Redraidernurse]

I know this isn't really a "problem", but I am curious as to what you would do right now with $25,000 that you plan to use in two years time to purchase a family vehicle. Currently both hubby & I drive vehicles that are paid off, but in about 2 years time we plan to have a 3rd child and will most likely need to upgrade to a family vehicle to be able to fit 3 car seats across the backseat. (We plan to have more children after that so it's not a matter of if, just when). We have $25,000 in savings that we've saved to purchase said vehicle but I hate to see it collect dust and inflation eat away at it until we use it.

Emergency fund & retirement are already being met & we are currently investing $2k a month into mutual funds. Should we just up the amount we contribute to mutual funds each month? We are wary of putting it all into a mutual fund in one sitting instead of spreading it out over a period of time.

Also, I guess we could continue to use my truck when we have a 3rd child, although finding three carseats to fit in the back would prove tricky. My truck will be 12 years old at that time but it is still running great at 90k miles.

[bjl584]

Well,
Interest rates stink, but you want to keep the money safe since you need it for two years for a car. I would probably just let it sit in a MM account or maybe a CD if you can find a decent rate. You're not going to get more than 1% anywhere right now.

[jla85]

catch 22

If you ask me you may be in a catch 22 allow to me explain:

You are concerned about inflation eating away at your dollars but if you put it in a cd and say get less than 1% on it while the bank is making 17% on the money they lend, doesn't seem fair. Beyond that your gains if above $10 are taxable. Make matters worse you are buying a depreciating item which if it is an SUV for the larger family needs will lose as much as 56% in the first three years alone (assuming its a new car). So what has really happend to your dollars then? You are nowhere near keeping up with inflation and you are losing even more on the vehicle. BUT you need the car and you SHOULD make money on your money. I would consider that the above posts are correct as general rules of thumb and keep it liquid in a money market. I would encourage however reading up on investments that create monthly cash flow like owning property or establishing businesses. The reason being if you can get a property to yield say a positive cash flow of $400 a month, that property is paying your car note plus when the car is paid off the property still yields you the positive cash flow. Let your investments buy your toys and thats how you beat inflation. I hope this is helpful. Some research is required but this can be worth while.