Where to keep savings?

[charliebrown]

Hi MM, I'm mostly a lurker, but hope you all can give me some advice. DH and I keep our e-fund in an ING account. We will finally have 6 months of income saved within a few month, and then we are planning to put the money we had been putting in our e-fund into a new account for a down payment for a new house.

We are hoping to save ~$50K over the next 4.5ish years into this account. Should we open another ING account (or similar), or would it be better to invest this money?

[SJ]

Most people here would probably tell you to save for the house in cash. Not a bad idea and definitely safe.

I think having 6 months e-fund plus $50K all in pure cash is a bit too conservative. Personally, I would open a Sharebuilder account (brokerage linked to ING) and invest some in fairly stable, dividend-paying stocks or even preferred stocks. Index funds are another good route.

Since you have a medium time frame, don't go too crazy on the investing, but I really do think 5 years is a long time to hoard cash earning so little interest. It's about comfort level though. What does your DH think? Will it drive you crazy to have some of your savings fluctuate with the market?

You can do something like split future contributions 50/50- cash & index/dividend fund, which keeps the e-fund in cash. Or vice versa- start to invest the e-fund and continue to save cash. Lots of options here!

[charliebrown]

Thanks! I too feel like having it all in cash is very conservative, but I also know I'll get pretty discouraged if we put a bunch in the market and end up watching the values drop. Neither one of us knows very much about investing and getting into the stock market, so I thought this might be a good place to start asking questions. We'll definitely be speaking with our financial planner in the near future for some more specific advice, but I hadn't even though about splitting it up and investing some while keeping some in cash.