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Locked in 5.00% APY

December 23rd, 2008 at 12:50 pm

This is a follow-up to my "Will We Have to Pay Banks to Hold our Money?" entry

Text is http://scfr.savingadvice.com/2008/12/19/will-we-have-to-pay-banks-to-hold-our-mo_46342/ and Link is
http://scfr.savingadvice.com/2008/12/19/will-we-have-to-pay-...

We decided to move some money to a 5-year CD at WaMu paying 5.00% APY. While some may disagree that a 5-year CD is not a good place for "short-term money," this CD stipulates that there is no penalty if principal is withdrawn due to the death of one or more of the account holders. (It is a joint CD.) We view our EF as a safeguard against 3 types of events: unexpected negative events such as natural disaster or catastrophic illness, major setback in DH's business, or death (of either of us, but for all practical purposes, it really would probably only be needed if DH died). For the first 2 types of events, the money needs to be kept liquid (MMA or short-term CDs). But for the 3rd portion (the "life insurance" part of our EF), the only thing that really matters is that we can get at it without penalty if someone dies.

5.0% is a lot more attractive than 0.5%, which is where rates might be heading.

6 Responses to “Locked in 5.00% APY”

  1. Aleta Says:

    I think that 5.00% is a decent rate that one can live with. I think you made the right decision in this invironment.

  2. scfr Says:

    You're absolutely right, Aleta. We're not doing handsprings over the rate, but we can live with it!

  3. disneysteve Says:

    I see nothing wrong with that. Remember, 'penalty for early withdrawal' doesn't mean you can't get to the money in an emergency. It just means you'll lose some of the interest. If there is a natural disaster or catastrophic illness, are you really going to care if you pass up a few months worth of interest? I doubt it. And since those things are unlikely to occur, your money will probably continue to generate 5% interest until term.

  4. scfr Says:

    That's right, disneysteve. A CD is sort of a "in case of emergency break glass" type of EF. You hope you don't have to "break the glass," and you will avoid doing it if you can find another way, but you know you can if you really, really have to.

  5. Ima saver Says:

    Gosh that is great. I wish I could get a rate like that. I have several c.d's coming due in January. Was this an internet bank, or bricks and mortar?

  6. scfr Says:

    Ima saver - It was WaMu (Washington Mutual Bank ... now part of JPMorgan Chase). We opened it through our local branch, but the same rate is available on-line. The one condition was that we had to have a checking account with them, which we already did have.

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