Where do i put my money?

Question

I'm just starting to save money. I currently have $5,000. I don't know where i should put it. I have it right now in my checking account. I want to earn interest but i'm not sure if i want to put it in savings, cd, money market or stocks. I'm 26 so i don't need the money for a while.

Answer 1

I am going to assume that this $5K is your emergency fund and as such, since you aren't going to use it, except in case of an emergency, you do want it to be somewhat liquid.  We use a "Risk-Free" CD from Bank of America for money that we want to make interest on but not lock up for a specific period.  I don't know if any other banks offer this or not but you put the money in for an 11 month term at the current interest rate.  If you don't need the money, you let it sit and generate interest.  If you have an emergency, you can take it out with no interest penalty.

Answer 2

If the $5000 is all the money you have accessible to you at the moment, I would not suggest investing in stocks or mutual funds.  The best way to earn a little bit on that money while still keeping it liquid in case you need it for an emergency is to park it in a good money market or online savings account.  You should be able to find rates of 3-4%.  The best interest rates are almost always found at smaller community banks or credit unions.  You can also find checking accounts that offer 4-5% if you meet certain requirements (use direct deposit, make a certain number of transactions with a debit card, etc.).  Go to www.checkingfinder.com and type in your zip code for a list of the best rates close to you.