Better than a CD?

May 14, 2009 2:11 PM

Saving for an engagement ring... Are there better options than a multi-year Certificate of Deposit?

I'm looking for something safe, secure and higher yielding than a savings account. A 3 or 4 year CD seems like the best option, as it matches my time frame, but is there anything else out there that I might not be aware of that I should consider? General advice and tips welcome as well.

posted by anonymous to Work & Money (12 answers total)

Check the current interest rates, but perhaps an I-Series savings bond? They're indexed to inflation, and you can cash them out after holding them for 1 year, though you lose 3-months of interest if you cash them in before 5 years. And unlike a CD, you do not have to pay taxes on the interest until you cash them in (and they are also exempt from state taxes).
posted by Calloused_Foot at 2:29 PM on May 14, 2009

The rates on CD's are pretty low right now, though higher most Savings accounts. If you lock in a rate of 2% or so for 3 years and Savings accounts go higher you may lose out in the long term. I like this post over at Get Rich Slowly. Great info in the comments too.
posted by IanMorr at 2:34 PM on May 14, 2009

OK, you may want to nix what I said - the rate is zero according to the treasury.
posted by Calloused_Foot at 2:34 PM on May 14, 2009

I'd be inclined to find a money market account instead of locking it in to a CD for 3 years. Rates on money markets and CDs are both crazy low right now, but they're likely to go up in the next few years. Even if you could find a CD that paid you 1 or 2 percent more, on $1,000 that's only $10 or $20 a year.
posted by willnot at 3:17 PM on May 14, 2009

Buy a share or two of Berkshire Hathaway B stock. Not only will you get to attend the annual meeting (if you want) and hear Warren Buffet speak, you will also get a significant discount at the Berkshire-owned Borsheims. They do ship, and you can deal with them over the phone, too.

Plus, the B-shares are a great value right now when you look at where they've been. They are likely to regain their value in the future. Warren is a pretty shrewd fellow.
posted by Ostara at 3:34 PM on May 14, 2009 [2 favorites]

What a strange question. Is the engagement so far out in the future that you are worried about an investment strategy? If your investment does not get the yield you want, are you calling off the marriage? Or are you just asking where is a reasonable place to invest X dollars for Y years, so that when Mr./Ms. Right comes along, you have some money set aside for a ring?

But I'll echo the advice of others, that the amount you spend is probably the least important aspect of the ring. Find one that's special to your fiance(e) and your relationship. If special means $$$$, then you will have some other issues to work through.
posted by ldenneau at 4:13 PM on May 14, 2009

Maybe he or she's saving ultra conservatively. Just because it's 3 years down the road, doesn't mean he or she's putting $1000, or $500 or even $100 a month away.

Spend what you want to spend on a ring. I like the Berkshire Hathaway idea a lot.
posted by jerseygirl at 5:41 PM on May 14, 2009

Have you considered an online savings account? HSBC and ING both offer them. Their interest rates are significantly higher than brick-and-mortar banks, but you still get the flexibility of pulling your money out when you need it. I kept my engagement ring cash at HSBC and it worked out well. They even give you an ATM card which was nice, just in case I needed that money in an emergency.

Visit bankrate.com for rates on savings accounts and CDs.
posted by JuiceBoxHero at 6:27 PM on May 14, 2009

Mod note: A few comments removed. The question is pretty straightforward and "should I buy an expensive ring" is not it.
posted by cortex (staff) at 6:30 PM on May 14, 2009

As a woman who has recently got married, I have noticed that women who have been married for several years do not tend to wear their engagement ring that much, so the amount you spend may not be important compared to the sentiment. Consider spending only a few hundred dollars/pounds as what is more important (IMO) is that you are engaged and can start a life together with the money that you didn't spend on a ring. Just a thought!
posted by lilyflower at 3:47 AM on May 15, 2009

If I knew I'd have a big expense like this three or four years from now, and I wasn't comfortable with risk, I'd probably put my money in a money market account. If you have $1,500, I'd look at EverBank, which is offering 2.51% for the first six months on new money market accounts. Check out bankrate.com before you leap.

After six months, I'd see where interest rates are and reconsider. As others have noted, if you bought a multi-year CD today, you'd be locking up your money for a couple of years at an extremely low rate. In six months, things might be different.

Berkshire Hathaway B stock, or any stock, might be a wonderful investment. Or it might not- there's a chance that the value might go down, and the price today reflects everyone else's expectations about how much the price will go up. (Personally, I'm a little worried about the future of Berkshire just because of the cult of personality around the founders, but what do I know?) If you're attracted to CDs, it implies that you're uncomfortable with risk. If that's not correct, by consider stocks, but consider what would happen if your ring fund declined.

If you're still reading this, I'm puzzled, too, about how you know you'll want to buy an engagement ring in 3-4 years.
posted by Clambone at 8:12 AM on May 15, 2009

regarding the time line -- may be that they are currently in a long distance relationship that may not allow them to "be together" until further down the road. (have a friend in this situation)

they may have talked about it and know it will happen at some point but not sure when, just down the road (have another friend in this situation -- they were "together" for about 6 or 7 years before they made it official - there was never a doubt/they were in the same area/both wanted it but never made the time for it

sorry i cant help with the investment question, but its something im interested as well

/thread hijack

posted by knockoutking at 10:10 PM on May 16, 2009