CDs, Money Market Funds and Savings Accounts Oh My!

2006-06-25

As the financial tide begins turn, you get better interest rates on today’s CDs, money market funds and savings accounts than you did 2 years ago. And the best news is that they are positioned to get even better.

Two years ago, short-term rates were sitting around 1% no matter if you were savings $10,000 or $200,000. It really didn’t make much of a difference if you buried your money in a mason jar in the backyard or stuffed it under your mattress. Now, thanks in part to by the Federal Reserve, savings accounts like CDs and money-market funds matter again. Rates are hovering around 3.7% with some pushing the 4.75% mark verses the 1% earned just two years ago.

But there is no reason to rush. Rates should continue this way for the near future. Rates are anticipated to increase even more as we get later into 2006. Short term CDs should reach 4%-4.2% and if you can afford to dedicate the funds to a 5 year CD, you can expect rates around 5%. That would be a good time to lock in a solid no risk return.

Use online services to shop CD rates and make a list of the one’s that look attractive to you. Then monitor these CD returns over the coming months to plan your move. If you are locked into a CD that has a low rate, it will probably be to your benefit to cash out and pay the 3 to 6 month penalty to get the higher returns.

Here are a few samples of what we have seen online.
• Corus Bank has been offering money market accounts with yields of 4.84%
• Ascencia Bank has a one-year CD with rates of 5.35%

Take some time to search online for what other institutions are offering. You maybe surprised at what is available now. If you are looking for little to no risk investment options, these new CD and money market accounts maybe just what the doctor ordered.

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