8 top places to stash your cash

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Savings Guide 2006

	Savvy savers
	There's more to saving than stuffing your extra cash in a mattress.

Savings: The next big thing

	Passbook savings		Certificates of deposit
	Money market accounts		529 accounts
	Christmas/vacation clubs		Savings bonds
	Money market mutual funds		Treasuries

Savings bonds

Pros

Cons

Who it's for

Comparison

	Reliable. Savings bonds have a fairly predictable rate of return. You pretty much know what they'll be worth in the end when you buy them. I bonds have two interest rates, one that will vary with inflation.
	Tax break. Interest may be tax-free if used for education, depending on the savings bond.
	Low minimum. Savings bonds don't require a large amount of money. You can get an EE bond for as little as $25.
	Security. These are backed by full faith and credit of the U.S. government, at least to a certain extent.

	Not as liquid. You have to keep EE and I bonds for at least one year. When you do cash them in, you get your principal, plus whatever interest they've earned.
	Long-term commitment. With bonds, you're locking up your money for a number years.
	Not competitive. You may be able to get a better rate elsewhere.

Excellent vehicles for savers looking to invest long-term and who don't mind a relatively low rate of return in exchange for stability and tax-deferred interest. Since you don't pay taxes on the interest until you actually cash them in, they can also be helpful in controlling income for tax purposes.

You can't cash them in for the first year, so they are not a good choice for money you might need immediately.

If either Series EE or I are used for college, then the interest is tax-free. Tuition-tax benefits and a lengthy maturity cycle have long made them a favorite gift for grandparents who want to contribute to a grandchild's education.

Series I bonds pay a rate that's adjusted for inflation, so consumers also use them as a hedge against an economic downturn.

Trying to figure out which options best match your savings strategy? Here are several key points to compare and contrast at a glance.

	Cost to open	Min bal.	Insured	At risk	Investment choice	Liquidity
Passbook savings	minimal	usually none	yes	no	no	complete
Money market acct	$1,000 - $50,000	yes	no	no	no	liberal
Christmas /Club acct	minimal	usually 0	yes	no	no	complete
MM mutual funds	$500 - $5,000	often	yes	no	yes	partial
CDs	$500 - $5,000	usually	yes	no	no	with penalty
529 accounts	minimal	usually 0	no	yes	yes	highly restricted
Savings bonds	approx $25	yes	yes	no	no	restricted
Treasuries	minimum $1,000	yes	yes	no	no	restricted

Select:

-- Posted: Oct. 1, 2006


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