Rental Property Investor · Atlanta, GA · Member since 2019 · 78 posts · 33 votes
Where do most people save their money while they are putting it away to save up for their next down payment of a property or investment? I currently have a high interest savings account with Ally paying 1.25%. I know that's still high for the moment compared to most other savings accounts, but I'm eager to get something better. I know stocks would get me a much better return, but i'm also looking for a relative safe place that isn't so volatile for the next 8 to 12 months.
What is your go to for situations like this? I'm open to any and all suggestions.
Investor · Latham, NY · Member since 2014 · 217 posts · 65 votes
6y
Have you ever considered cash value whole life insurance? If you search this site, youll probably find it discussed. Many times people will try to compare it to other investments which is not a fair comparison. Its merely a banking tool which can partially replace your banking system. Theyve never not paid out dividends. You can take a loan against your cash(if structured properly). Although your paying interest, youre still earning interest on your cash which is pretty much a wash. But the positive is the volume of cash you can run through it earning interest tax free. On top of that, youre also picking up life insurance. I would definitely look into to it. It might not be a great fit for everyone depending your needs but its basically a practice in "unconditioning" when it comes to managing money.
Investor · Latham, NY · Member since 2014 · 217 posts · 65 votes
6y
Have you ever considered cash value whole life insurance? If you search this site, youll probably find it discussed. Many times people will try to compare it to other investments which is not a fair comparison. Its merely a banking tool which can partially replace your banking system. Theyve never not paid out dividends. You can take a loan against your cash(if structured properly). Although your paying interest, youre still earning interest on your cash which is pretty much a wash. But the positive is the volume of cash you can run through it earning interest tax free. On top of that, youre also picking up life insurance. I would definitely look into to it. It might not be a great fit for everyone depending your needs but its basically a practice in "unconditioning" when it comes to managing money.
Investor · Latham, NY · Member since 2014 · 217 posts · 65 votes
6y
Best part about it is that although you dont want to cheat yourself when it comes to paying yourself back with a little more interest than your charged, when life does happen...creditors wont be calling for payment. In the worst case scenario if you never paid it back(god forbid), it would just come out of the death benefit.
Real Estate Agent · Fleetwood, NY · Member since 2018 · 264 posts · 235 votes
6y
@David New I think the two biggest questions are how much money we're talking about and how soon you plan to use the money. For example, if the amount was 20k, how much could you really earn on that in the next 8-12 months? If you were to receive a 10% return on that money, it would only be 2k. To me, that wouldn't be worth the risk of having your money stuck and not being able to purchase a property.
If you're confident that you're going to use the money within the next 8-12 months, then I would leave it in a savings account like you're doing so you know it will be there when you need it.
Rental Property Investor · Atlanta, GA · Member since 2019 · 78 posts · 33 votes
6y
@George Smith Thanks George. This is not something I have ever thought about or educated on but I will search around the site now to learn more. I really appreciate your response.
Have you ever considered cash value whole life insurance? If you search this site, youll probably find it discussed. Many times people will try to compare it to other investments which is not a fair comparison. Its merely a banking tool which can partially replace your banking system. Theyve never not paid out dividends. You can take a loan against your cash(if structured properly). Although your paying interest, youre still earning interest on your cash which is pretty much a wash. But the positive is the volume of cash you can run through it earning interest tax free. On top of that, youre also picking up life insurance. I would definitely look into to it. It might not be a great fit for everyone depending your needs but its basically a practice in "unconditioning" when it comes to managing money.
Hi George, some really good points here. Generally with a healthy dividend a whole life policy can earn more than the loan against it. The easiest way to see if this is an option is to find an agent that can quote the policy for you to see if it fits with your goals.
If your time frame is only 8-12 months, your options are somewhat limited.
There are many ultra short ETFs that hold commercial paper and treasuries that could push your yield above that savings account. It is in essence what your bank does with your money anyways. However, it is still going to have some volatility and may not add enough alpha to make it worth the bumpy ride.
Technically speaking there are a plethora of other debt or debt like instruments that would yield much higher, but I would not say the risk is comparable to your Ally account.