“Where to Stash Emergency Cash When the Average Savings Account Yields 0.11 Percent”
February 22, 2017, CNBC – With interest rates at historically lows, you don’t get rewarded by keeping your savings in the savings account. In this article, Howard Pressman along with other peers in the industry offer suggestions where to safely keep your “rainy day” savings that give higher returns than the regular savings accounts.
Howard advises to keep a portion of your savings in certificate of deposit offered by banks. Specifically, he suggests to use “ladder” approach where savings are divided in couple groups and each of them is put in a CD of a different length.
“Here's how a CD ladder would work: Let's say you have an emergency fund of $6,000. You put $2,000 in a six-month CD, $2,000 in a 12-month CD and $2,000 in 18-month CD. When the six-month CD matures, you invest the proceeds into an 18-month CD. You repeat the process as each CD matures. If interest rates rise, your laddering strategy will benefit from the higher rates.”