Investor · Seattle, WA · Member since 2016 · 156 posts · 34 votes
Hello Everyone!
I am starting to save for a down payment on my first home. I want to have 20k by April 2018. I am just out of college, and the last 3 months out of school i have been working full time and have been extremely aggressively paying off my student loans, while i was figuring out my financial plan. I currently live at home, and have no doubt i will be able to save the amount i stated above, but the question i am looking at is where to hold these funds. Should i keep my down payment and my continual contributions in index funds, money markets, savings account, buy bonds? Im looking for ideas here and opinions on where to save, i dont want to keep the down payment savings in my savings account where i get .02% interest.
All ideas will help, but very specific examples would really help, as in where you actually do the investing if you do.
Investor · Corvallis, OR · Member since 2015 · 92 posts · 57 votes
9y
I keep my cash in VCSH (Vanguard Short-Term Corporate Bond ETF). It maintains a pretty consistent value while kicking off a yield of just over 2%, so you are at least keeping up with inflation.
VCSH can be bought/sold commission free on TD Ameritrade (requires 30-day hold).
Investor · Pueblo, CO · Member since 2017 · 13 posts · 4 votes
9y
Blake King we are just getting started with Consumers Credit Union. They offer "Free Rewards Checking account, an interest bearing checking account that pays up to 4.59% Annual Percentage Yield (APY) on balances up to $20,000!" There are some hoops you have to jump through though.
I use variable rate CDs and plan to take them out after they mature. I have found that there are some CDs that you can add to (in minimum $50 increments) whenever you want and they fetch a higher return than money market and savings accounts (usually only about 0.25% more). As long as you plan the maturity date correctly you will walk away with a decent short-term return. The downside to using a CD is that the money is locked up until the CD matures. You can pull the cash early, but you will usually lose the interest.
Investor · Virginia Beach, VA · Member since 2015 · 83 posts · 34 votes
9y
Liquidity and lack of volatility are what you want. A savings account is perfect for this goal with less than a 12 month timeline before you want to use the money.
Think of it this way: Even if you found a high interest MMA like account at 5% and had the full 20k now, you'd only get 1k of interest by the time you wanted to use it. It's not worth the hassle. Your goal right now is to save, not earn interest.
I just started looking into an Ally online savings account. It's FDIC insured and they say they can offer 1.5%. Better than the .2% that I'm getting with my credit union! Has anyone had any experience with them?
Rental Property Investor · N. CA · Member since 2015 · 32 posts · 23 votes
9y
With such a short savings timeframe I agree with several people's comments on this thread. Focus more on saving than the interest you're going to earn. That being said it never hurts to use the best savings vehicle possible. We use Ally Bank, they have free checking and savings accounts, their saving account rate is 1%. We use this for our emergency and savings vehicle for liquidity and safety.
Memphis, TN · Member since 2017 · 21 posts · 9 votes
9y
Blake King I am in a very similar situation to yourself. Thanks for posting. This thread has been great! I especially like the 401K loan option, thanks Ed E.
Like you, I do not want my money just sitting in an account even if it is not a large amount, I want all of my money working for me. With that said, I use Lake Michigan credit union to hold my money in. It gives 3% APY with very easy requirements that I'm sure you already do with your current bank.
Also, I use betterment to invest any extra money. But I've thought about switching that extra money to Wealthfront since it is a small amount, currently less than $4,000. There are no fees with wealthfront on the first $10,000 invested, $15,000 if you refer a friend.