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!