Investing for the Future
My mother always told me that should have at least six months of your living expenses saved in case of emergency, and I highly doubt that $8,000 will be enough to cover your living expenses for four months let alone six or more. When it comes to investing in CD’s you must first understand what they are and what some of the potential risks may be. CD’s or Certificates of Deposit can be defined as savings accounts with a set maturity date and limited access to account funds until the maturity date is reached.
There are several advantages and disadvantages to CD’s some of the advantages are that they provide an excellent short- to medium-term investment (typically from three months to seven years) for investors who prefer little to no risk. Also CD’s offer a higher rate of return than traditional money market accounts. Finally Most CD’s are FDIC insured meaning their funds will be covered up to $100,000. Some Major disadvantages of CD’s are that Investors can redeem bank-issued CDs prior to maturity. However, you could be charged an early withdrawal penalty. These penalties are set by each bank and differ nationwide and often times are not worth accessing your funds early.
If you need your money quickly with out worry of fee’s CD’s may not be the best idea. If you were to consider investing in CD’s I would, first like you to evaluate your financial situation and determine what your plans are for your money. For example if you are saving for retirement CD’s may prove to be beneficial however if they are simply trying to save money to buy a new Stereo System they may want to choose something that will not restrict access to your money. Some funds could be invested in the stock market however when investing in the stock market you must always proceed with extreme caution.
The stock market is always risky no matter how solid a stock may seem there is always chance that the stock could drop causing you to loose your money rather than increase it. I would say invest half into the stock market and prior to investing I would suggest that you do extensive research on your chosen stocks before investing. When it comes to any major investment especially one so risky research is very important. Some Suggestions I would make to help to save more money and grow your initial $8,000 would be to move your saving to a high yield saving account 3.5% is definitely too small to make any major increase in your money. I would suggest setting up a financial plan that maps out all your monthly expenses after which you would then determine how much of your monthly income could be used toward investments.
Say for instance your Monthly living expenses were $4300 that would leave you with $700 each month that could be deposited into their savings account or used towards other financial investments. I would suggest making both short term and long term investments. I would also suggest spreading out your money in many different ways for instance savings bonds, money market accounts, CD’s and so on so that you can diversify your portfolio and have a better understanding of which methods are proving to be more beneficial to your financial future.
