How should I hold my cash?

[LRAO]

I have determined that 6 months of emergency money would be $20K. Right now it's all sitting at ING.

However, 1-year CD rates are very appealing now and I think I want to begin a ladder (4 CDs at $2500 each, 3 months apart).

In addition, I've also been reading about I and EE-bonds, but am not sure how they fit into my portfolio.

So...do I go $10K at ING (very liquid) and $10K into CDs and consider I/EE bonds a separate asset category?

Thanks for the input.

 

[Nords]

Spouse & I went round this debate last month and decided that emergency funds are unlikely to be used more than once or twice a decade-- so a five-year CD or an I bond may be a much better alternative.

 

[Spanky]

One-year CD rate is quite attractive now. Experts are saying that CD rate will likely rise at the end of this year. Therefore, there is no rush of buying a 5-year CD.

 

[Mr._johngalt]

I consider borrowing power as our "emergency fund".

As for CDs, I lost interest in them when the 5 year variety dropped below 5%. I don't know now.
I liked my 7% more while 5 year CDs were under 4%.

JG

 

[Spanky]

CD rates are pretty good at Pentagon Federal
1 year 3.10 %
2 year 3.60 %
3 year 5.00 %
4 year 5.00 %
5 year 5.00%

3 year term seems to be optimal.

 

[Craig]

Unless it changed, note at Pentagon FCU the only interest penalty is loss of the last 6 months of interest. Not too big an issue when you want to move, relative to short rates.

 

[Mr._johngalt]

I only have one CD now..........9 months at
2.75%. Forget how long it has to run yet
but I think the penalty is one month's interest.
Not much to worry about.

Speaking of penalties, I recently opened an
"investors saving account" which pays me 3.25%.
The rules are that you can only make one (1)
withdrawal per quarter, unless you do an
electronic tranfer. Then you are allowed 6 per month.
The penalty for non-compliance is $25. The penalty
for closing your new account early (first 6 months?)
is only $15.00. Again, not much to worry about.
If short term rates keep climbing I will be moving both
of these accounts soon.

JG