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January 23, 2008

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Other than CD's and money markets, what do you suggest investing in if you still need that money to be fairly liquid?

For example, my wife and I are planning to quickly pay off our house. However, we plan on building our next home which means we'll need a pretty large downpayment. Thus, we may have 100k house loan left, but we'll have 100k in cash sitting around. Where should I put that money besides CD's and money markets?

Beastlike --

Personally, I'd put it in moneuy markets and CDs.

FMF - Up to what amount would you then start to consider something else? 200k?

Ideally I would like to own a home that I planned on staying there or could stay there forever (no need to ever upgrade) and have about 50k in CD's/MM's. However, since I am basically saving for a large downpayment on that house, I'm just not sure I am making the right decision keeping a large amound of cash in investments only making inflation plus 1-2%.

Are you willing to risk losing principal in the short term for a hope of gaining a couple percentage points in return? Personally, for something like saving for a house, I would stick with the 5% return in a money market and not have to worry about the risk of the stock/bond market.

Beastlike --

There's nothing I can think of that will give you a better term and complete liquidity in the short term.

FWIW, I have my new house downpayment money in a money market. Yeah, I might not need it for another year. Then again, I might need it tomorrow.

Just a question about this saving say 10%, or 20% etc. Is this for saving for retirement? Or is this for a new car we might need or to make some sort of other investment or a new computer?


Sounds good.. Well, if anything, at least I am little more confident that I am making the right decision. Most likely our move is 3 to 5 years off, but if another baby pops up anytime soon, that can quickly change!

Thanks FMF/Kevin!

Scott --

I'd say 10% for retirement (counting an employer match) plus any additional saving you may need.

Can't you use the 20% in savings as potential emergency fund? Not sure why I would want 2 different accounts for something that should only be used in case of an emergency.

I would say 20% is the absolute minimum you should be saving. We save more like 50% and I think if you want to be financially prepared for the future you can't get away with anything less than 10% short term and 10% long term. But that's just me.

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