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Money Q&A: With interest rates being so low these days, where do you recommend putting your money?

Q.

The Nest Q&AWith interest rates being so low these days, do you recommend keeping money in your savings account until rates go back up, putting money into a CD, buying stock, or another alternative?

A.

In addition to saving for retirement, it’s really important to build a security or emergency savings reserve. As we’ve recently witnessed, no matter how well you plan, there are always things beyond your control that can go wrong -- the economy can go sour, people can lose their jobs or their health, businesses can go bankrupt, etc.

I used to emphasize the importance of saving your money in a place that would give you a reasonable rate of return. But these days, with interest rates at rock-bottom levels and the stability of many financial institutions still in question, I worry more about security.

Of course, interest rates won’t stay in the basement forever. But until they recover, I’d focus less on the kind of return you’re getting and more on making sure your emergency money is safe and accessible.

Use sites like Bankrate.com and BankingMyWay.com to search and compare features for many financial institutions. Be sure the bank is FDIC insured; then consider:

  • What the minimum opening deposit is
  • Whether you’re able to set up a systematic program that automatically transfers money from your regular checking account (key to saving consistently)
  • Whether the account comes with check-writing privileges and an ATM card (in case you ever need quick access to your funds)
  • Whether the bank charges a low-balance fee (some accounts charge as much as $25 per month if your balance dips below a preset minimum)

Lastly, consider US savings bonds. Although they pay very little interest, there’s no safer place to put your money. Find out more at TreasuryDirect.gov.

Start Rich, Finish Over, David Bach David Bach, author of seven NYT best sellers. His new book is Start Over, Finish Rich. Click here to visit his website.

-- David Bach

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