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Nov 22, 2009

Where to Put Your Money Conservatively

There are three places (besides savings accounts) where you can park your savings that will give you high degrees of safety and liquidity: money market accounts, certificates of deposit (CDs), and government saving bonds.

Money Market Accounts
Money market accounts are available at your bank and pay a higher rate of interest than savings accounts. They are also quite competitive, so you should shop around and look at what different banks offer. As soon as your savings account balance exceeds $1,000, move that money into a money market account at a higher rate of interest.

Certificates of Deposit
Another savings instrument that you may consider is a certificate of deposit (CD). These are issued by banks, savings and loans, and other financial institutions for periods of time ranging from 30 days up to 10 years. The longer you lock up your money in a CD, the higher the interest rate you will receive.

The weakness with CDs is that if you need your money back before the date of maturity there are often severe penalties. You should find out what they are before you purchase a CD in the first place. CDs pay higher interest rates than money market accounts, and are safe places to put your savings. Nonetheless, they are not as flexible as the third option, which is a government savings bond.

Government Savings Bond
Government savings bonds are the most conservative of investments. They are safe and secure, and they pay reasonable rates of interest. They are easily negotiable into cash if you need the money back at any time. They're backed by the full credit of the issuing government. In other words, you cannot lose money on a government savings bond unless the entire country goes broke.

Invest your Savings
These three types of investments are perfect places for you to invest your three to six months of savings. You will get the highest return possible with absolute security and safety principle.

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