What investment options do I have for a chunk of cash I need in 12m?

August 15, 2017 12:25 PM

I am looking for a way to earn some interest on savings that I know I will need within 12 months, more details & requirements below.

I have to set aside a chunk of money each month to pay my property tax at the end of the year, plus I set aside some money for non-monthly expenses, ie. random house repairs, car maintenance, pet care etc. The point being that I need to access it a few times throughout the year and it needs to be there.

I am looking for a way to earn some interest on the approx 15K I set aside for these things, my requirements are: must be able to auto deposit monthly & be fairly hands off (as you can tell, this is not where I excel), no fees for pulling money out, ideally better interest than a standard savings account and extra special points for something I can do within my current Fidelity account. NOT looking for specific investments, just some "investment product" beyond the stock market that is safer. Thanks!

posted by vividvoltage to Work & Money (8 answers total)

Fidelity has an article specifically about this on their website outlining options. Given you actually need this money (i.e., cannot lose it) you are looking towards the no/very low risk stuff like savings accounts, maybe short-term bonds or CDs that mature when you actually need the money during the year.
posted by notorious medium at 12:31 PM on August 15, 2017 [1 favorite]

I think if you want to be adding in/pulling out chunks throughout the period of a year, you're not going to do much better than a high-interest savings account.

If you have a chunk already saved up, I would recommend a no-risk CD -- I know Bank of America used to sell these, although I don't see them on the website so you might need to check with a branch to see if they're still around. They're basically CDs with a slightly lower interest rate where you can withdraw funds at any time with no penalty. But, I don't think you could auto-deposit every month, it's more deposit a big chunk of cash once that you might later want to take out.
posted by rainbowbrite at 12:38 PM on August 15, 2017 [3 favorites]

Ally has a decent rate on their savings account and CDs. They have an 11 month "no penalty" CD with a slightly higher rate than their savings account. With that, you can break the CD at any time without penalty, but you have to take it all if you break it. You can't just withdraw some of it. I have been a customer of Ally for over ten years (back when they were GMAC) and have no complaints.
posted by jkent at 1:43 PM on August 15, 2017 [1 favorite]

What you do with the no-penalty CDs like Ally's is open, say, ten of them, and put 10% of your money in each. That way, the minimum you need to withdraw is 10%, not the whole amount.
posted by kindall at 1:58 PM on August 15, 2017 [5 favorites]

I don't think you have a better option than a traditional (but high-interest) savings account or a money market account. It sounds like you need more liquidity than you're going to get with a CD, and the rates aren't that much better.

Look for an account making 1% or more; that's about the best you can do nowadays.

(I'm saving for a house down payment and I keep the money in a CapitalOne360 Money Market account. I had it in a bond fund, which is historically pretty safe, but it kept losing value - not, like, stock market crash losses of value, but it sure wasn't going up.)
posted by mskyle at 2:11 PM on August 15, 2017

Here in Ontario financial institutions will have teaser rates for high interest savings accounts every now and again. They have limits on the amount you can deposit and they usually only pay the higher rate of interest for 6 months or so but the money isn't locked in so you can use it when needed and can always move to a different institution once the teaser rate runs out. I would suggest checking for something similar where you are.
posted by any portmanteau in a storm at 4:07 PM on August 15, 2017

Devil's advocate: a 1% better return (which you'd be lucky to get) on $15,000 is $150 (taxable) a year. While nothing to sneeze at, it also wouldn't be enough for me to want to make depositing, managing, and withdrawing from my current-needs funds more complicated (or time consuming) than making a single ATM visit or smartphone transaction, or once in a great while writing an actual check at the moment I need the funds. A laddered CD (or bond, if you were dealing with larger sums) portfolio is the optimal way to squeeze maximum predictable earnings out of current savings (you stagger the due dates of the various CDs so they come due incrementally, roughly in line with expenditures). I guess a no-risk CD is effectively the same thing.
posted by spitbull at 8:05 PM on August 15, 2017 [2 favorites]

Discover's online savings offers all of this, plus 1.15% interest, which is about the same as a short-term CD. It's the best, absolutely free, easiest option, and the one I use for exactly this purpose. (The CapOne Money Market is only 0.6% right now, so I moved all my money out of there.)
posted by Capri at 11:33 AM on August 16, 2017