Liquidity concerns, and small differentiation, trumped CD rates for us again

May 31st, 2009 · No Comments

Yet again, we chose not to roll over May’s expiring 6-month CD as part of our income-replacement / emergency fund.  The best rate we could find, again at a local credit union, was just 0.15% APY lower than the rate we’re getting in our savings account at FNBO Direct.  And the liquidity trade-offs are worth more than that to us.

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Overall, we have some hope that things are generally looking up, or perhaps just not looking as steeply down, that we chose not to lock up our money at a 1.80% APY for 6-months.  We haven’t actually seen any banks raising their savings account rates, but at least the rate of them going down has seriously slowed.  So this is a gamble on our part that things won’t go lower still.  We consider this a very small gamble because even if savings rates go down, there just isn’t that much further to fall and we’d much prefer the unquestioned access to our money that comes from keeping it in a savings account.

We want that liquidity because the risks we’re facing seem much more individual now rather than general.  By which I mean, the risk of losing a job, or missing out on an opportunity, seems more significant than the risk of everyone lowering interest rates further.  In the case of a lost job or upcoming opportunity, it could be critical to get at our money right now, rather than later so that is weighing heavily on our minds.

We’ll re-evaluate the situation again around the end of June.

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Tags: Savings

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