May 2008
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If you want your savings to be available at a moment's notice, try a money-market fund from a mutual-fund company or brokerage
firm, suggests Carolyn McClanahan, a financial planner in Jacksonville, Fla.
Such funds invest in highly liquid, safe securities such as CDs, government debt, and commercial paper (short-term obligations issued by corporations). In March Vanguard Prime had a seven-day yield of 3.64 percent; the Fidelity Cash Reserves fund paid 3.53 percent.
If your furnace conks out or you have to pay an unexpected medical bill, you can usually just write a check to access the account. And the returns on money-market funds are typically higher than those on the money-market accounts that traditional banks offer.
Just keep in mind that money-market funds, unlike the bank kind, are not federally insured. But the short maturities of the securities they own make them relatively safe.
Depending on your tax bracket, you may also want to consider a tax-exempt money-market fund. In March, some tax-exempt funds were returning 3 percent or more. That's the equivalent of a 4 percent yield for someone in the 25 percent tax bracket.
Such funds invest in highly liquid, safe securities such as CDs, government debt, and commercial paper (short-term obligations issued by corporations). In March Vanguard Prime had a seven-day yield of 3.64 percent; the Fidelity Cash Reserves fund paid 3.53 percent.
If your furnace conks out or you have to pay an unexpected medical bill, you can usually just write a check to access the account. And the returns on money-market funds are typically higher than those on the money-market accounts that traditional banks offer.
Just keep in mind that money-market funds, unlike the bank kind, are not federally insured. But the short maturities of the securities they own make them relatively safe.
Depending on your tax bracket, you may also want to consider a tax-exempt money-market fund. In March, some tax-exempt funds were returning 3 percent or more. That's the equivalent of a 4 percent yield for someone in the 25 percent tax bracket.
