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ways to protect your cash

Posted on 13. Mar, 2009 by janelle in penny pinchin'

If you have money saved and/or invested, news about the stock market and banks may be leaving you feeling unsure about how to protect your money.  Well, CNN Money has a great article with suggestions on today’s safest places to stash you cash.  Check out the article for full details, but here’s a summary of what they have to say…

The idea is that CDs (certificates of deposit) and money market funds are still generally safe places to keep your money, though they are less lucrative than before.  The key is to do your research and see what various banks have to offer, but there some important things to consider.

Certificates of Deposit

• VERY IMPORTANT - Establish that the CD  is FDIC-backed (meaning it’s insured).  If not, don’t put your money here.
• When considering your FDIC-backed CD options, determine the early withdrawal penalties.  Narrow your choices to those that have the lowest penalty.
• Once you’ve got a list of FDIC-backed options without excess early withdrawal penalties, then compare yields (meaning the return on your investment).  Be cautious of yields that seem too good to be true - they just might be.  Make sure the issuer is “stable”. 

Money Market Fund

• A more liquid, but less lucrative, alternative to the CD is the money market account.  If being able to withdrawal from the account at anytime is very important to you, perhaps you should consider this option.
• Yields fluctuate regularly and right now a 1% yield is considered high.
• Money market funds are not FDIC insured, but a program was put into place in September of 2008 that guarantees assets.  This program expires in April, but it’s believed it will be extended.

Don Humphreys, president of Voyager Wealth Management, says that the ”current lows make [money market fund] options of the last resort. If you have money that can be locked up for a short term, I’d definitely recommend a CD”.

Tags: certificates of depot, cnn money, money market fund, protecting your money