~We have a complete 6 month EF in our two savings accounts and they're hardly earning anything in interest. We're actually losing money since the inflation rate is much higher than the interest rate. It has me thinking about alternatives to a traditional savings account. For example:
*investing in collectibles/antiques
*buying gold
*investing in home improvements
*paying down mortgage
*buying land
Does anyone have any thoughts about or experience with these? Any other investments I should consider?~
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~Constance ~DH ~DS 7~DD 5 ~ And expecting #3 Aug 30th!
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The EF is not an investment. The EF is insurance. Insurance is something you pay for now, so you won't have to pay later. In this case, you pay the lost value due to inflation, so you won't have to pay money on debt borrowed to handle whatever life throws at you.
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If you could kick in the pants the person responsible for your problems, you wouldn't be able to sit for a month.
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I agree with Greebo, 100%! Maybe put it in a CD or Money Market account, but save it, save it, save it!!!
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"I need to remember that the source of all I have and all I am comes from the Lord. I need to remember that ultimately I am not totally in control." ~ forHISglory
*investing in collectibles/antiques
No - this is not a good savings plan as if you need the money you will only get what someone is willing to buy at that time. Antiques go thru cycles when everyone wants the "hot" thing, and other items drop in value. Bad idea
*buying gold
No - great investment if you fear collaspe of the US dollar, but other than that, not a good idea. Plus you will always pay retail plus in a store but sell below retail.
*investing in home improvements
No - Have you not seen the news about failing home values? Plus houses are not longer piggy banks that you can just pull out equity. Say you put in new flooring, spend $5K and then need that money. You can not just rip up the flooring and take it back to the store for a full refund. You're option might include taking out a home equity loan, but now you've given yourself a debt and are paying interest on this debt as well.
*paying down mortgage
No - see above. A paid off mortgage as great as that will feel will not put food on the table or pay the electric bill. You only have access to this money if you sell, and will failing home prices this is not good.
*buying land
No - You have to sell the land to get your money out. And it's only worth what someone is willing to pay for it. Say you total your car and need $5K to get a "new" used car. You now have to sell the land to get the money out. If you are pressed for time, you now are a desparte seller. Not a good plan.
Your 6 moth FFEF is for emergencies, it needs to be liquid and easily accessible. This is a savings account for a rainy day... It is going to rain, we all know that, it will rain again someday and you need this umbrella.
You are talking more about investments and investments and savings are two completely different things.
Savings is savings, it's money that is always going to be there, yes, you get a lessor return in the form of interest, but the money isn't going to go anywhere.
These other things you've mentioned are investments. Investments involve risk. You could make a lot of money, or you could lose everything. Yes, there are different levels of risk within investing like bonds, but also very risky investments like the future's market or buying antiques thinking they will increase in value in the future.
Sure, my interest rate stinks too, 1.50%, but the base is never going to go anyplace. I'm not so worried about inflation, it's not a big deal in the grand scale of things. If I need my FFEF, it's there.
Now if you want to take some other funds and make investments like the above you mentioned, go for it, but only do so with the knowledge that there is not any sort of a guarentee that you will recoup that later on.
For your FFEF, it needs to be liquid and nothing else should even be considered or thought of.
It's not losing value and your interest rate is not lower than inflation. Current inflation rate in the US is 0.24%. There's a good chance you'll see deflation before any significant inflation, and when inflation goes up interest rates will go with it.
It's irritating to see rates drop on a savings account, but your EF is not an investment, it is there to provide financial security. The income is not it's purpose, so think of anything that it earns as a bonus. Bonuses just happen to be low this year.
If you have additional money which you want to invest but not lose, put it on the mortgage. Everything else on your list is extreme high risk, you'd have lower risks in the stock market than the collectibles market and that gold bubble has got to be close to bursting.
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Last edited by monkeywrangler71; 03-24-2009 at 06:59 PM.
I have *some* of mine in a CD. I was lucky and got a good rate before the crash. If I need it, it only takes a week to get it out. I'll forfeit my interest, but if I don't need it I'll have earned a little bit on it.
The government doesn't want you to save money. They want you to blow it on crap you don't need, that's why rates are so bad. One of our savings accounts has dropped its rate by 30% in the last 6 weeks. Unreal. We still have it on auto-deposit.
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Make it do, Or do without. ~unknown
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But if you try sometimes you just might find
You get what you need ~Rolling Stones
The government doesn't want you to save money. They want you to blow it on crap you don't need, that's why rates are so bad. One of our savings accounts has dropped its rate by 30% in the last 6 weeks. Unreal. We still have it on auto-deposit.
Lets not be too paranoid here...this isn't a Government plot, it's an unintended consequence.
What the Government wants is for money to be easy to borrow.
To encourage borrowing, rates for borrowing are down.
Banks make money by lending money. To lend money, they have to have money available. This money has to come from their savings reserves.
The profit made by a bank comes from the difference between the interest they collect (loans) and the interest they pay (savings/cd's/etc).
So when loan rates go down, savings rates *also* go down. You cannot have high interest rates on savings unless you are also having high interest rates on borrowed money. (Think 1970s)
__________________
If you could kick in the pants the person responsible for your problems, you wouldn't be able to sit for a month.
Did you know that a 4 year student paying $20,000/year who finances their education graduates with over $103,000 in debt to start? But a student who works and pays cash and takes 6 years to graduate ends with $6,300 in their pocket! So much for "getting a head start by financing!"
Greebo(Nerd Spender): Loving and extremely patiently tolerated husband of ceashels. WARNING: Y Chromosome behind the keyboard. Adjust your listening filters appropriately!
Three Two mortgages, twoone no car loans, one no credit cards, and a partridge in pear tree!
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Urg! 1.5 & .5% Savings Interest!
~DH 
~DS 7
~DD 5 
~ And expecting #3 Aug 30th!
: $16
I agree with Greebo, 100%! Maybe put it in a CD or Money Market account, but save it, save it, save it!!!
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