gurus say, "Invest for the long term." But those of us who have to pay
the bills know that sometimes it's smarter to keep cash where you can get to it
quickly, preferably in a risk-free investment.
In the last few years, it didn't much matter where you put that
cash. Under the mattress seemed good enough when interest rates were less than
But interest rates have slowly climbed, as the Federal
Reserve has methodically raised the target short-term interest rate that banks
pay for overnight loans to cover reserves, driving up other rates that are linked
to it. Now finding a good parking place for your cash is worthwhile.
people argue that small percentage differences in yield don't amount to enough
return to make up for the effort involved in moving money. That might be true
if you're Daddy Warbucks, but for most of us, more money is generally better than
less. For instance, the difference in the interest rate that savings accounts
pay can easily be more than 3 percent. Do the math. On $50,000, the difference
in a year's worth of interest at 0.5 percent compared to 4 percent is a whopping
These days it's not too difficult to find accounts
with interest rates north of 4 percent. Below are some ideas for stashing your
cash where it's safe, but where you can get to it easily -- and the return is
nothing to sniff at.
of deposit, or CDs
Banks make their money by taking in deposits at
relatively low rates and lending money out for the long term at higher rates.
With loan rates going up, banks are eager to get access to your money, so some
are offering very attractive savings rates.
When you purchase
a CD, you invest a fixed amount of money for a fixed period of time -- one month,
three months, six months, a year, five years, etc. In return, the issuing bank
pays you interest at regular intervals. In these days of increasing interest rates,
it's rarely smart to lock up your money for more than a year, especially since
you can find 90-day CDs that pay almost as much as banks are offering for longer
If you're interested in maximizing your CD return, Bankrate
publishes a daily list of the highest-yielding
CDs available nationally. The institutions that consistently provide the highest
yields to consumers are recognized with Bankrate's Top
Updated: Dec. 29, 2006