Ask the grumpies: Where do you park your short-term savings?

SP asks:

Where do you park your cash when saving up for a larger downpayment? So far Ally Bank CDs are my leading candidate. Leigh recommended getting the 5 year and breaking after 2 due to low penalty. I’m wondering if rates might be going up soon. We currently have something like $50k in a “high yield” savings account at .75% or something like that, and expect to add something like $4k/month.

Ed note:  This question was asked a while back, so interest rates have probably risen since then (as I’m writing this, the fed says they will go up in Feb, most likely).  Also SP has already bought the house!  So our answers are pretty useless.

Like the previous question on where we keep our emergency fund, I’m afraid we keep our short-term big savings in a savings account.  Technically mine is in a term-share account.

CD ladders do make a lot of sense when interest rates are higher, but when you can only make at most a couple of hundred dollars total with your tens of thousands of dollars locked up rather than having it sitting in savings, it may not be worth it.

We still don’t recommend the stock market for short term savings.  It seems like a really good idea when it looks like the stock market can go nothing but up, but then you hit a short-term correction, and sometimes that correction happens right when you need the money.  Long term that isn’t a big deal, but short term (say you’re saving to live in paradise on half your salary and you need that money to live on short-term), it can be.

I’m not even chasing rates at new banks (again, we’re talking a couple hundred dollars for hassle I would pay to avoid and lower accessibility)– I have a big bank account and a credit union account (and an online account that never use anymore).  The credit union has the highest rates, so that’s what we use.  #2 hates credit unions for reasons I don’t understand and keeps hers at her bank.

Ed. note from #2: the reason is because credit unions are MEGA inconvenient.  They aren’t around nearly as much as bank branches where I’ve been living for the past 15 years.  Don’t try to convince me!

14 Responses to “Ask the grumpies: Where do you park your short-term savings?”

  1. Leah Says:

    Another vote for the savings account, although I still bemoan not having this amount of money in the account back when I could have made 5% interest. Sigh. I really value cash liquidity; this helps me sleep at night. If you do too, the savings account is the way to go.

  2. chacha1 Says:

    My short-term savings are in a bank account. It is supposedly an interest-earning account but the amount is so low it is … well, it’s below “laughable” and into “ludicrous.” But this is *short term* which means being able to add & subtract & transfer & whatever, easily, is of primary importance. … The DH has accounts at University Credit Union, but like #2 says it is just not sufficiently convenient to use that. Also for Reasons I am more comfortable keeping “my” savings in “my” bank.

  3. Leigh Says:

    I’ve already answered this question, so I’ll just comment on credit unions :D

    I love credit unions, but they’re definitely local! There’s one right next to my office and that’s who I do my daily banking with. I love that you can withdraw money from almost any credit union ATM in the US for free and you can also go into any credit union branch that has the “shared branching” feature and perform many transactions on your account. All of those reasons make them reasonably convenient. Plus, there are very few reasons to go in branch these days other than a cashier’s check or getting a specific dollar amount of cash that an ATM won’t give you.

  4. becca Says:

    My credit union gives me 3% on my checking account (up to 15k), so I’ve got some there. In the past I’ve used ally and CDs.

    I’ve thought about switching to consumer’s credit union, cause they are available for anyone to join (after a $5 donation to something or other) and give 3.09% without a credit card, 4.09% with one, and up to 5.09% on up to 20k with a credit card if you charge $1000 or more a month.

    NB: these accounts all require you get and use a debit card a minimum number of times, do direct deposit, ect. They also reimburse all ATM fees, so even if they aren’t located near you at all, you could use them for everyday checking type banking.

  5. MutantSupermodel Says:

    I left my credit union when out of the blue they started charging fees for their checking accounts. No thanks.

  6. Katherine Says:

    We have a pile of cash (emergency plus slush) in an “interest-bearing” savings account at the same huge national bank where we have our checking accounts. We have our house downpayment in a 5-year CD at a different bank getting 2.25%. My husband and I felt lucky to find that rate (a year ago), enough to make him get over his loyalty to the huge national bank (I do understand the desire to have everything at the same bank for convenience, but I don’t understand his brand loyalty to this particular bank). The penalty on breaking our CD early would be 6 months of interest, so even if we walk into the bank and break it tomorrow, we’ve already come out way ahead of doing anything else safe with our money.

  7. Mrs PoP Says:

    Cash in savings accounts at Wells Fargo, credit union, and Ally (listed in ascending order of how easy they are to access and in descending order of interest they pay!). =)

  8. SP Says:

    Still good information to have for the efund and such!

    I did try to open an Ally account, but I had recently moved, didn’t have a power bill (power was included in rent), and no longer had the USPS change of address card (who saves that?), and those were the proof of address they would accept. For whatever reason.

    I’m also doing a savings account. I should check out local credit unions too.

  9. Ana Says:

    Not that I actually know what I’m doing with money (as has been firmly established) but we have a huge (diminishing as I move the money into investments) pile of cash in a savings account at capitalone and a more reasonable pile (our emergency fund) in a 5-year CD at Ally bank. I actually broke a CD at capital one to move it into ally and already paid that penalty off in one year because of the increased rate at ally.
    Becca’s comment above (3%???) makes me want to look into the credit union my work is affiliated with. Its new, so we had already set up direct deposit with the national bank that had a branch located next to the hospital, but that branch moved out 3 years ago and credit union moved in, and I never thought about switching. I’ve also never heard of consumer’s credit union, will check that out too.

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