Friday, July 22, 2011

The Right Savings Vehicle

Recently I began to ponder upon some of the changes in my life at a stage when most are planning for retirement.  Having two very young sons, however, has led me into a much different path in my musings.  How do I provide for their future?  As I thought about this, a number of options crossed my mind.  Almost any kind of investment comes with some risk.  Realizing the importance of having a solid financial base for a college education for them, I wished to minimize that risk while still ensuring the best possible return on my money.  As I have watched part of my retirement money melt away with stock market fluctuations along with the fact that the stock market is for the longer term, I realized that stocks were probably not the way to go.

Lately I have concluded that government bonds are no longer viable for this situation, so I turned to looking at what some of the local banks were offering.  While a simple savings account is fine for that rainy day fund ( and necessary too, I might add), that type of investment did not give the needed return.  It was very flexible, allowing me to withdraw money whenever needed and deposit whenever I had some extra, but it also had a rather low interest rate.  I checked into the money market which is also rather flexible and found a slightly better rate; however, after shopping around, I did find a savings vehicle that seemed to be a good fit.  Certificates of deposit yield a higher interest rate and allow flexibility of both amount and time.

A website that gives excellent information on different investments may be found at http://www.fdic.gov/consumers/index.html.   Many of my questions were answered by this page.  The drawback to this type of investment is that there is a penalty for early withdrawal, but one may choose the length of the term until maturation.  Of course, the longer the term, the greater the rate will be.  One can find a good comparison of rates on the best  CD  by visiting Discovery Bank.

1 comment:

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