What Should I Do with My Short-Term Savings?


Saving money is not something that comes easy to most family child care providers.

We all have many excuses for why we don’t save more. We’d rather spend money on something we want today rather than saving for the future.

I urge all providers to establish a regular habit of putting aside some money each month. Even small amounts can add up quickly. If you save $25 a week and invest it in an IRA that earns 6% a year you will have $17,644 at the end of ten years.

You should also be saving money to help you meet short terms goals such as an emergency fund, car replacement fund, vacation fund or the purchase of furniture or appliances.

If you will need the money in the next five years you don’t want to take chances that the money won’t be there when you need it. So, where should you put it?

Here is what you can expect to earn in interest if you put your money in these places:

  • Under your bedroom mattress: 0%
  • Interest-paying checking accounts: 0.25%
  • Money market/savings accounts: 1%
  • 1-year CD: 1.14%
  • 5-year CD: 1.76%

(These numbers were taken from www.bankrate.com. Rates will depend on each account and the financial institution.)

When deciding where to put your money, watch out for these things:

  • Don’t buy a CD unless you are sure you won’t need the money until the end of the CD period (1 year, 5 years). There will be penalties for taking money out early.
  • Some checking or savings accounts may have a minimum balance you must maintain.
  • Some money market accounts may charge an annual fee. Such fees will reduce your overall return.

When you do save money, identify the purpose of the savings and put it in an account specifically for that purpose. In other words, if you are saving for an emergency fund and decide to put it in a savings account, label your savings account as your “emergency fund” and don’t comingle it with other money. If you put emergency fund money into an account with other money, you may be tempted to spend it on something other than an emergency.

Low interest rates have been with us for a number of years and nobody knows when they will rise. But, despite such low interest rates, don’t be discouraged in establishing a savings plan. Money does grow over time. Keeping your short-term savings in a safe place is more important that earning a lot of interest.

Thanks to Mari Millard.

Tom Copeland – www.tomcopelandblog.com

Image credit: https://www.flickr.com/photos/jakerust/



Categories: Money Management, Money Management & Retirement

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