Where to park our medium-term savings?

  • Dave Ramsey

    Dave Ramsey


Dear Dave,

My husband and I are completely debt-free, and were saving up for our first house. We currently have about $90,000 in savings, and wed like to buy a home with cash in the next few years. Where should we put our money, so it will work for us while we save more?

Aimee

Dear Aimee,

Its a great feeling when you dont have any debt hanging over your head, isnt it? With the path youre on now, just imagine how incredible it will be in a few years to have a new home and still be debt-free!

If I were in your shoes, and maybe looking at a three-to-five-year window, Id just park the cash in a good market account. You wont make a lot off it, but your money will be safe. Besides, all youre looking for is a wise place to stash it for a little while.

When it comes to long-term investing Im a big fan of growth stock mutual funds. The problem with that in your situation would be the volatility of the market. By the time youve saved up more money, and spent time deciding on a house, the market may be down.

It sounds like you two are doing a fantastic job with your finances. Congratulations!

Dave

***

Dear Dave,

One of my friends suggested that I put my emergency fund money into bonds. What do you think of this idea?

Renee

Dear Renee,

Never put your emergency fund into things where volatility and risk are a concern. An emergency fund isnt an investment; its three to six months of expenses set aside to help protect you from the unexpected things life will throw at you. My advice is to keep your emergency fund in something simple like a money-market account where theres no penalty for early withdrawal and cheque-writing privileges for easy access.

Bond values and prices go down when long-term interest rates rise. Right now, long-term interest rates a good example would be mortgage rates are ticking up. So, as this happens, the value of bonds goes down.

Were not looking to make money with an emergency fund, Renee. Think of it as a type of insurance. Just let it sit there, safe and sound, until its needed!

Dave

Dave Ramsey is CEO of Ramsey Solutions. He has authored seven bestselling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 14 million listeners each week on 600 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

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Published Dec 15, 2018 at 8:00 am (Updated Dec 14, 2018 at 7:57 pm)

Where to park our medium-term savings?

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