In article <973c4773.0309261524.35da6b62[at]posting.google.com> ,
brflaming[at]yahoo.com (Randy Gordon) writes:

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I have never heard of a CD one can add to monthly. Until recently, I hadn't
heard of a CD one could add to yearly.

The minimum required for opening a CD varies drastically between financial
institutions. You might find one institution that offers CDs with minimums low
enough that you can take out a new CD every month. If you are aiming for 6
months of living expenses, you could, for example, take out a new 6-month CD
every month and, when it matures, add to it in the window before it is locked
in for the next six months. Or, if you are aiming for the equivalent of a year
of living expenses, take out a new 1-year CD every month for the first year
and add to it when it matures and before it rolls into a new 1-year CD.

Generally, the longer the term of the CD, the higher the interest rate, but
also the higher the penalty if you need to liquidate the CD before maturity.
(That is why someone else suggested having a credit card that you can use to
bridge the gap between when the cash emergency happens and when the next CD
matures.)

Many people prefer having at least part of their emergency fund in a money
market account or a money market fund. You can use http://www.bankrate.com to
search for decent paying money market accounts. (Many people like the Ing
Direct Orange Savings Account--http://www.ingdirect.com)

I like keeping the equivalent of 3 months of living expenses in my credit
union's money market account, and the equivalent of now about 6 months of
living expenses in Savings Bonds (I-Bonds and EE-Bonds). Most of my "cash
emergencies" have needed the equivalent of 3 months or less of my emergency
fund, and only twice in the past 27 years had I needed the equivalent or 4 to 6
months of living expenses (and one of those times was 6 months of
unemployment), so I feel comfortable having a two-tiered approach: 3 months
quite liquid, the rest a little less liquid for higher returns.

A couple down-sides for I-Bonds (Series I Savings Bonds) and EE-Bonds (Series
EE Savings Bonds) are: they are illiquid for the first year from month of issue
(unless the Treasury Department declares your area a disaster area), and you
forfeit the most recent 3 months of interest if redeemed in less than 5 years
from month of issue.

The up-sides for I-Bonds and EE-Bonds include: the interest they earn can be
tax deferred (one can either declare the increased in redemption value every
year for all of one's I-Bonds and EE-Bonds, or not report any of the interest
on I-Bonds and EE-Bonds until a specific Savings Bond has a taxable event, such
as reaches final maturity 30 years from month of issue, or is redeemed, or is
reissued) and it turns out that it is actually easier to wait on the reporting
of interest until a taxable event (one receives a 1099-INT for all the
accumulated intereset on that Savings Bond when one redeems it) and, if the
need is because of a period of unemployment, that may very well be a time when
the federal taxes would be at a lower marginal tax rate; the interest is exempt
from state and local income taxes; other than the 1-year illiquidity and 5-year
3-month interest forfeiture for under 5 years, there is no need to wait until a
specific window to redeem them (unlike the 10 days or so window between when a
CD matures and when it is locked in for its term again); and, through Treasury
Direct (http://www.treasurydirect.gov) each Savings Bond purchased can be
purchased at any issue price from $25 to $30,000, specified down to the
penny--the Treasury Direct Savings Bonds are "book entry" or paperless, so
there aren't specific pre-printed denominations. Also, one can set up repeated
purchases through Treasury Direct (on the web site) so every month or other
schedule one has established, a specific amount would be direct debited from
one's bank account and purchase a "book entry" Savings Bond.

When I built up my Savings Bonds holding, I did so over time because I didn't
want too much of my emergency fund locked up in the period of illiquidity--an
emergency fund doesn't do one any good if the money cannot be accessed at all
during a cash emergency.

See http://www.publicdebt.treas.gov/sav/sbiinvst.htm for more information about
I-Bonds.

See http://www.publicdebt.treas.gov/sav/savinvst.htm for more information about
EE-Bonds.

Some people use a short-term bond fund or a municipal bond fund with check
writing privileges for part of their emergency fund.

Some people use Ing Direct Orange Savings Account for almost all of their
emergency fund.

Mark A. Young

Small banks in my area offer short term CD, aka term deposits, that mature
every 7 days and you add and subtract on that day.

The other alternative is buy CD's with your monthly expenses and ladder them
so that they renew monthly.

Another choice is look at money market and bank rate mutual funds for a low
risk and highly liquid parking place.

"Randy Gordon" <brflaming[at]yahoo.com> wrote in message
news:973c4773.0309261524.35da6b62[at]posting.google.com...
- quote -

In article <973c4773.0309261524.35da6b62[at]posting.google.com> , Randy
Gordon <brflaming[at]yahoo.com> wrote:

- quote -

I don't know of any CD's that work this way. One possibility is to
put your monthly money into a money market account, and then purchase
a CD when the balance builds up to a high enough value. One issue
that you will run into is that CD's lock up your money for anywhere
from 6 months to 5 years or more, so your money is not easily available
if you have an emergency. Also, longer term CD's have much better
interest rates. A strategy to consider is to use a credit card for
your emergency fund, and carry the balance until your CD's come due.
Next, ladder your CD's so you are always investing in the longer
term CD's, but always have one coming due each year (or better yet,
every 3 to 6 months). If you are lucky, you will have one of those
0% convenience check offers from your credit card when your
emergency hits so you avoid paying any interest other than the
check fee.

-john-

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John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
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Is it possible to add money to a Certificate of Deposit every month?
I'm looking for an account where I can put my emergency funds.
Ideally, I would like to add to this account monthly. I'm thinking a
CD would be a good choice. Does anyone have any other suggestions?