Best saving option over a 2 year period with regular deposits?

Question

My girlfriend is saving money while I am finishing up my degree. She so far has just been pooling the money in her checking account. She is planning on transferring it over to a savings account but I think she'd be better off putting it in a CD or something. She's afraid that she won't be able to access the money if she needs to if it's in a CD. Would a money market account make sense? Also I think the only time she'd need the money is in an emergency. She has about $6,000 saved right now and saves roughly $1,000 a month. Ideally in 2 years or so we will use the money towards a down payment on a house. I'd prefer something with guaranteed returns and no risk versus say investing in the stock market or mutual funds.

Answer 1

What interest rate is she getting at her current bank? Sometimes a savings account actually has higher interest rates depending on which bank, the amount and the period. Try searching http://www.bankaround.com and see if you can find a decent paying savings account that is comparable to your current bank's CD rates.

Answer 2

Some banks have high yield savings or she can just get a cd for 3 months. If the minimum cd is $500 buy 2 . Also make sure when you buy your first home, you get a fixed rate mortgage with an open end which means you can pay it down without being penalized. If you get a 30 year mortgage, you pay about 70% on the first 15 years. Also request an amortization that will give you a break down between interest/principal