Personal E-Newsletter - June 2013

Tips for Graduates to Pay Back Student Loans

'Tis the season for graduation! Students across the country have finished their two- or four-year college degrees and will begin hunting for jobs in a still-sluggish economy. Their degrees give them a leg-up on their peers, but also likely leave them staring down thousands in student loan debt. Students in the U.S. face a total of $986 billion in combined debt, averaging $24,810 per student. Here are some tips to keep you on track as you repay those loans.

Get organized. Most college graduates have outstanding loans from multiple servicers, so it's important to make a list—whether it's on paper or a digital spreadsheet—to keep track of them all. Include the servicer's name and website, the total amount of the loan, how much is due each month and the due dates.

Stay in touch with your services. College grads often move several times following graduation, due to job searches and other factors. Make sure you always update your address with your loan servicers so any information they send you goes to your current address. A convenient way to make sure nothing gets lost in the shuffle is to sign up for email communication from your lenders.

Select the repayment plan that fits your situation. Most student loan servicers have a wide variety of repayment plans available, so choose the option that will work the best for you. If you got a job straight out of school or have enough saved up to last until you do find work, a standard repayment plan will probably be the best fit. If you're taking time to do volunteer work or travel, or you haven't been able to find work in your field, consider an extended payment plan or one that has smaller monthly payments at first. Work with your lender to choose the option that fits you.

Make your payments on time. The number of students who are at least 90 days late on student loan payments has increased to 11.7 percent, up from 8.5 percent in 2011. This will not only cost you more in late fees and higher interest payments, it can also ruin your credit for the future. If you have trouble remembering when your payments are due, or simply don't want to have to worry about them, sign up for automatic payments.

Use deferment as a last resort. While putting off making payments may seem like an attractive option, it will end up costing you much more in the end, because interest on the loan continues to accrue during the deferment period.

Student loan debt may seem insurmountable, but getting organized and budgeting carefully, these loans can be paid off on schedule, or even early. Talk to your banker if you need help getting your finances for student loan repayment.

Source: http://www.bankwithcornerstone.com/tips-for-graduates-to-pay-back-student-loans/

 


Picking a Bank Account for Your Child

There have been quite a few complaints from both parents and the personal finance industry concerning the lack of education children receive about basic financial matters throughout elementary school, high school and even in college. Parents are responsible for everything their children learn about money issues. While that is a reasonable and expected part of parenting, financial education can be difficult to teach if parents themselves are unsure of how to manage their finances.

One of the cornerstones of a child's personal financial education is a bank account. A child taught the value of saving rather than spending has a good early foundation in smart money management. As a responsible parent, you should consider what matters in a child’s account just as you would consider which bank provides the best options and most benefits for your family finances.

When looking for the right bank and account type for your child, do a little research before making a decision. You owe it to your child and to yourself to compare what is out there.

Here are the factors to think about:

Nearby branches: You may not consider this factor as important in the grand scheme of things, but having a brick-and-mortar location to bring your child to can make a world of difference in the lessons you are trying to reinforce. A child may initially have some difficulties parting with their birthday cash or allowance money, but getting to take a special trip to the bank to deposit his or her money can help cement the money principles you are trying to teach and create an excitement about savings that online only banks cannot provide.

Account fees: Teaching your child about saving will also involve teaching about the cost of different services people need to pay for, but it is better to find an account that has no or low fees for account maintenance. It’s not fair to have all of your child’s savings wasted on fees. With so many changes in the banking industry, a free bank account is getting much harder to find, but it is worth the time to seek out reasonable fees.

Important money lessons to teach your kids:

Interest earning potential: Child accounts established for savings may offer a higher interest rate than other types of accounts. Consider that even a little bit more in interest can be well worth it in the long run as your child continues to save. Interest should not be the only factor you consider, but it should be one of the priorities.

Encourage the act of saving: Kids may be thrilled with the idea of starting a savings account or they may roll their eyes and complain about losing their cash. No matter what their initial reaction is, it is important for parents to keep reinforcing the value of saving money. Help a child to first realize that all of the money does not have to go into the bank by establishing a percentage that should be saved from each allowance or monetary gift.

Let your child have access to some of their own money for purchases they want. It will help them learn the value of a dollar and gain a better understanding of how the money system actually works. At the same time, you should be reviewing monthly statements with your child to show them how, in addition to the interest they are earning, their money is beginning to add up.

Establishing good financial practices: Young children tend to enjoy the perks of a lollipop or other treat with each visit to the bank, but as a child gets older they can continue to learn age-appropriate lessons concerning personal financial matters. Throughout adulthood, these early lessons will be the foundation for your child’s overall financial life.

As a parent tasked with teaching children about the importance of careful financial management, keep in mind that another key lesson kids will take away is their own parents’ personal financial strategies. It is important for parents to provide the education and real-world experience with financial matters, but it is also important to give your kids a good example to follow. Parents who do not maintain their own finances and who do not make savings and budgeting a priority may be teaching lessons that fall on deaf ears.

Click here to learn about MoneyIsland, brought to you by Coulee Bank: a virtual interactive game that teaches children financial knowledge and provides a $10 initial deposit into a Beginning Savings account when they bring in a reward certificate. 

Source: http://money.msn.com/how-to-budget/picking-a-bank-account-for-your-kid


Easy Facelifts to Sell Your Home Now

Eager to sell your home? Be careful. Many people anxious to sell feel prepared to find a buyer, negotiate a deal, pack up their belongings, and relocate. The issue is that their home isn't quite ready to put on the market.

Fortunately for sellers, home prices are rising, inventory is low and the number of contracts to buy existing homes in March of 2013 rose to the highest level in nearly three years, according to the National Association of Realtors. Although the market is strong, if you overlook important home updates and repairs in rushing to put up that for-sale sign, you could hurt your chances of getting your asking price.

With simple outdoor repairs, interior cosmetic fixes and a good scrubbing, you can make your house shine for prospective buyers. Here's how:

Do a clean sweep. A dirty home is an immediate turnoff. While sellers frequently focus on tidying up high-traffic areas, such as bedrooms and bathrooms, many forget to clean the oven, furnace and baseboards. And don't forget floors and ceilings, which buyers pay close attention to. Sellers often make the mistake of simply painting over a stain in the ceiling when the whole ceiling needs to be repainted, says Chris Dossman, a real estate agent with Century 21 Scheetz in Indianapolis. She also recommends that homeowners with stained carpeting consider whether it's worth replacing.

Those with pets may want to ask a neighbor to watch their furry friend during viewings, as some people are afraid of dogs or are allergic to pet hair (another reason to keep those carpets cleaned). Pet beds, toys, blankets and feeding bowls should be stowed away.

While many homeowners use plug-in air fresheners and candles to mask pet odor, strong scents can give viewers a headache. "The best smell in the house is clean," says Maureen Bray, a home-staging professional and owner of Room Solutions Staging in Portland, Ore. "You can get that fresh smell by cleaning often and letting your home air out a lot."

De-clutter. Although a home's square footage may look good on paper, a deluge of knickknacks can make a room appear smaller.

Connie Holubar went to extra lengths to organize her current home before putting it on the market. "We even organized the closets by style of clothing and color," says Holubar, a public relations consultant in Dallas. "It sounds OCD, but people will open them and think, 'Wow, there's so much room in here.'"

You can also create more breathing room in closets by removing excess blankets and linens and out-of-season clothes, such as heavy coats during the summer.

Clearing the floors creates open space and makes a room feel larger. "If people have beautiful hardwood floors, they really need to show them," Bray says. "That's a feature that buyers are paying for today. If you have big area rugs, remove them or replace them with rugs that are a smaller size."

Depersonalize. Personal items can distract buyers from your home's best features, so it's best to put away collections (even your beloved family of Pez dispensers). While you may love a lime-green den, buyers tend to prefer neutral colors on the walls, like beige or light gray. And even if it's tradition to put up a Christmas tree, holiday themes may turn off some buyers who practice a different religion, says Amanda Nachman, a resident of Mendota Heights, Minn., who sold two of her homes without a real estate agent.

Michael Corbett, Trulia's real estate expert and author of several books, including "Ready, Set, Sold!" says he cringes when he sees a house on the market that's cluttered with family photos or children's drawings on the refrigerator. "You want a buyer to be able to walk in and see themselves in your house—not you," Corbett says.

Enhance the furnishings. Think your home's layout needs some professional fine-tuning? Consider hiring a staging company. For about $150 to $250, a stager will give you a consultation that includes a walk through of your home and tips on how to improve each room. Staging for a vacant home, meanwhile, can run $2,000 or more and involves outfitting select rooms with new furniture based on your budget. "You don't need to stage every room," Bray says. Instead, she typically only stages rooms that have the biggest impact, such as the master bedroom, family room and kitchen.

"People should show each room in its intended, original function," Bray adds. For example, a formal dining room that you turned into a playroom or office can confuse prospective buyers and make it difficult for them to envision how they would use the space.

Polish the curb appeal. According to Corbett, "Selling a house is a lot like dating: A pretty face will get buyers in the door." So cut the grass, trim shrubs and prune hedges to make sure the lawn looks manicured. You don't have to plant a full-blown garden, but a few flowers can make a home more inviting. Some real estate agents recommend placing potted plants on both sides of the front door.

When it comes to the home's exterior, consider whether you need to paint, patch weathered gutters or repair light fixtures. Driveways and sidewalks should be power-washed. Even replacing worn house numbers or an old mailbox can elevate a buyer's first impression, Holubar says.

The entrance is most important, Corbett says, since most buyers see the front door first. A fresh coat of paint (in an inviting color), a shiny door handle and a new doormat can make all the difference.

Source: http://money.usnews.com/money/personal-finance/articles/2013/04/30/easy-facelifts-to-sell-your-home-now


10 Easy Ways to Save for a Down Payment

The down payment is often the toughest hurdle to clear when buying a home. Whether you’re opting for a Federal Housing Administration mortgage loan with just 3.5 percent down, or shooting for a conventional loan with 20 percent down, saving for a down payment on your first home can take years. It’s even more difficult to save when you’re juggling rent, living expenses, insurance payments and debt.

Whether your goal is $5,000 or $50,000, consider these 10 simple ways to save for your down payment:

1. Negotiate your rent. With rent likely near the top of your list of expenses, cutting its cost can help you sock away serious savings. If you’re a good tenant, approach your landlord about lowering your rent. If that doesn’t work, consider downsizing to a smaller, cheaper apartment, and put the money you save on rent directly into savings.

2. Shop around to reduce major monthly expenses. If it’s been a while since you checked rates for your car insurance, renter’s insurance, health insurance, cable, internet or cell phone plan, now is the time to look into those costs. You may be able to save hundreds or even thousands of dollars by making alterations to some of these contracts.

3. Check out your IRA. First-time homebuyers can cash out up to $10,000 from an IRA without having to pay the standard 10 percent early withdrawal fee. If you’ve been saving in an IRA, check your balance, and consider cashing out part of the money to put toward your down payment. You can find out more about the rules for this type of withdrawal at IRs.gov.

4. Look into state and local home-buying programs. Check to see if your state, county or local government operates any programs for first-time homebuyers. Some programs offer housing discounts, while others provide down payment loans or grants.

5. Throw a garage sale. You may be surprised how much money you can make through a garage sale. It probably won’t be enough to fund your whole down payment, but garage sale profits can get you started. However, you may be able get better deals on your big-ticket items by selling them on eBay or Craigslist.

6. Monitor your spending online. Do you frequently wonder where your earnings have gone at the end of every month? If this is the case, you can save a lot by tracking your finances and cutting down on discretionary spending. Online tools help you manage your spending to save more on everyday expenses.

7. Pick up part-time work. Getting a side job is a great way to generate extra income that you can save exclusively for your down payment. Consider freelancing in your field outside of work; you may be surprised how much you can boost your earnings with a few hours of part-time work each week.

8. Refinance debts. Refinancing doesn’t just apply to mortgage loans. In fact, you can refinance just about any debt, from credit cards by using balance transfers, to car loans by taking out a lower interest auto loan through a new lender.

9. Cut back on student loan payments. If you’re drowning in student loan debt, you may be able to scale back on your student loan payments—especially if you have government-backed loans. Talk to your lender(s) about repayment options, including income-based repayment plans. Adjusting a repayment plan could substantially slash your monthly student loan payments, giving you more room to save for a down payment.

10. Keep track of your progress. It's important to follow your progress toward being able to afford the down payment. Consider posting a savings graph on your fridge. Keeping your progress in front of you can help boost your motivation to keep on keeping on, even when it’s tough to save extra money.

Source: http://money.usnews.com/money/blogs/my-money/2013/05/17/10-easy-ways-to-save-for-a-down-payment


What’s Your Retirement Number?

Imagine planning for a vacation you'll be taking some 20, 30 or even 40 years from now. You don't know where it will be, how much it will cost or how long it will last, but you're tasked with saving a chunk of every paycheck toward that trip until the day you embark on it. You're not even sure how much to save or when you have saved enough. Crazy, huh?

Welcome to the world of retirement planning, in which everyone younger than retirement age is expected to anticipate future expenses, figure out the amount that will cover those costs throughout old age, and save like mad until they hit the magic number. Unlike previous generations, for whom employers did some of the saving in the form of pensions, current and future generations must sock away most or all of the savings themselves.

Not surprisingly, researchers, financial institutions and financial planners offer to help you set that amount, from multiples of final salary to percentages pegged to your preretirement income. But no one formula fits every person or life stage, says Steve Utkus, director of the Center for Retirement Research at Vanguard. "The further away you are from retirement age, the more uncertain the model."

Still, retirement formulas do help you focus on what you need to do, says Chuck Yanikoski, who developed RetirementWorks II, a financial-planning tool for people near or in retirement. Retirement benchmarks also keep you from overshooting or undershooting the mark. "A lot of people are stressed who don't need to be, and others are cheerfully heading into disaster," says Yanikoski. "Either way, you're better off knowing where you are."

Calculate your target

No matter what your age, you should have at least some idea of how much income you'll need in order to maintain your standard of living once you're out of the workforce. Retirement analysts generally set the number at 70% to 85% of preretirement household income. That's not because you'll be expected to skimp in your old age, but rather because some costs, such as payroll taxes, money set aside for retirement saving and work expenses, will disappear and others, such as your income taxes, could drop.

To keep it simple, Fidelity arrives at the 85% replacement rate by multiplying your final salary by eight. The calculation includes Social Security but doesn't factor in dual incomes; it assumes you'll retire at 67 and spend down your nest egg over 25 years. Fidelity also gives you savings mileposts: Save one times salary at age 35, three times salary at 45 and five times salary at 55. "The idea is to give people a rule of thumb so they know whether they're on track while they have time to make adjustments," says Jeanne Thompson, a Fidelity vice-president.

Aon Hewitt, which provides bookkeeping services for 401(k) plans, sets a benchmark of 11 times final salary, and others use still other criteria. But the precise number isn't as important as the overall message. "These are all just calls to action to be an aggressive saver," says Utkus. "If you've only saved five times your salary and Fidelity or Vanguard says seven, you know to get on the stick."

If the quick-and-dirty formulas aren't precise enough for you, you'll have to do some fancy footwork. Arriving at a realistic figure to gen­erate 70% to 85% of your preretirement income requires projecting how much your savings will earn before and during retirement, how old you'll be when you retire, the rate at which you'll withdraw your savings, and how much income you'll get from other resources, such as pensions and Social Security. If you're married, you need to calculate joint income and expenses as well as post-retirement distribution strategies. "We're all making assumptions and guesses about the future," says Rob Reiskytl, partner for retirement consulting at Aon Hewitt.

Men who make it to 65 can expect to live to 82, on average, and 65-year-old women can expect to live until age 85, according to the Society of Actuaries. Health, education and family history play a role in your own life expectancy (to see how, use the calculator at www.livingto100.com), but no one can predict the date of your demise. Unless your health or family history indicates otherwise, set the age in the low-to-mid nineties or even higher, advises Michael Kitces, a partner at Pinnacle Advisory Group, a wealth-management firm in Columbia, Md.

For an easy but somewhat more precise approach to figuring your nest egg, Kitces suggests multiplying your estimated preretirement household living expenses by 25, after subtracting whatever amount you'd get from Social Security and pensions. This calculation assumes you'll withdraw 4% in the first year you retire and adjust that figure annually for inflation—an amount some planners consider low enough to keep you from running out of money even if you live to your mid nineties. For instance, if you plan to live on $5,000 a month ($60,000 a year) in retirement and anticipate $3,500 a month in Social Security benefits for yourself and your spouse (including spousal benefits), your net amount is $1,500 a month ($18,000 a year) and your rule-of-thumb savings would be $18,000 times 25, or $450,000. You can get an estimate of your Social Security benefits by using the calculator at www.ssa.gov. 

Reassess the numbers

Relying on broad savings benchmarks is fine for most of your working life, but "as you get closer to retirement, you need to have a plan that takes into account the unique characteristics of your finances," says Dan Keady, director of financial planning at TIAA-CREF. Five years out, he says, "look at what you're actually planning."

You might be surprised to find that you're in better shape than you thought. For instance, if you're on target to pay off your mortgage by the time you retire, you may not need 80% of your income to maintain your standard of living or, if you live in a high-cost area and plan to move to a cheaper one, "maybe a 60% replacement rate is fine," says Keady. Health, travel plans, housing arrangements and marital status all play a role in how your money holds up. Meanwhile, as you age, your expenses are likely to go down: A 2012 report by the Employee Benefit Research Institute shows that household expenditures fall 19% by age 75 compared with age 65, 34% by age 85, and 52% by age 95.

In any event, by the time you're 60 or older, you should have a handle on the savings and income you'll be working with, says Yanikoski. "You've been dealt all your cards. From now on, the issue is how you play them." You could decide to reduce housing expenses—say, by moving to a less expensive home. Now is also the time to consider whether it makes sense to invest some of your savings in an annuity for lifetime income. If your savings look skimpy, plan to work longer.

As for your standard of living, "we're trying to set guidelines that expect the same lifestyle," says Reiskytl. "But in reality, you may have to back off a bit." Cutting expenses doesn't necessarily mean you'll have to change your standard of living dramatically, he says. "When you talk to retirees and ask them how it's going, they typically say it's fine. Behind the scenes, they may be making adjustments to live within their means."

To help you determine how much you need to save and assist you in implementing a plan, talk to Shari Hopkins in the Coulee Investment Center. Imagine planning for a vacation you'll be taking some 20, 30 or even 40 years from now. You don't know where it will be, how much it will cost or how long it will last, but you're tasked with saving a chunk of every paycheck toward that trip until the day you embark on it. You're not even sure how much to save or when you have saved enough. Crazy, huh?

Welcome to the world of retirement planning, in which everyone younger than retirement age is expected to anticipate future expenses, figure out the amount that will cover those costs throughout old age, and save like mad until they hit the magic number. Unlike previous generations, for whom employers did some of the saving in the form of pensions, current and future generations must sock away most or all of the savings themselves.

Not surprisingly, researchers, financial institutions and financial planners offer to help you set that amount, from multiples of final salary to percentages pegged to your preretirement income. But no one formula fits every person or life stage, says Steve Utkus, director of the Center for Retirement Research at Vanguard. "The further away you are from retirement age, the more uncertain the model."

Still, retirement formulas do help you focus on what you need to do, says Chuck Yanikoski, who developed RetirementWorks II, a financial-planning tool for people near or in retirement. Retirement benchmarks also keep you from overshooting or undershooting the mark. "A lot of people are stressed who don't need to be, and others are cheerfully heading into disaster," says Yanikoski. "Either way, you're better off knowing where you are."

Calculate your target

No matter what your age, you should have at least some idea of how much income you'll need in order to maintain your standard of living once you're out of the workforce. Retirement analysts generally set the number at 70% to 85% of preretirement household income. That's not because you'll be expected to skimp in your old age, but rather because some costs, such as payroll taxes, money set aside for retirement saving and work expenses, will disappear and others, such as your income taxes, could drop.

To keep it simple, Fidelity arrives at the 85% replacement rate by multiplying your final salary by eight. The calculation includes Social Security but doesn't factor in dual incomes; it assumes you'll retire at 67 and spend down your nest egg over 25 years. Fidelity also gives you savings mileposts: Save one times salary at age 35, three times salary at 45 and five times salary at 55. "The idea is to give people a rule of thumb so they know whether they're on track while they have time to make adjustments," says Jeanne Thompson, a Fidelity vice-president.

Aon Hewitt, which provides bookkeeping services for 401(k) plans, sets a benchmark of 11 times final salary, and others use still other criteria. But the precise number isn't as important as the overall message. "These are all just calls to action to be an aggressive saver," says Utkus. "If you've only saved five times your salary and Fidelity or Vanguard says seven, you know to get on the stick."

If the quick-and-dirty formulas aren't precise enough for you, you'll have to do some fancy footwork. Arriving at a realistic figure to gen­erate 70% to 85% of your preretirement income requires projecting how much your savings will earn before and during retirement, how old you'll be when you retire, the rate at which you'll withdraw your savings, and how much income you'll get from other resources, such as pensions and Social Security. If you're married, you need to calculate joint income and expenses as well as post-retirement distribution strategies. "We're all making assumptions and guesses about the future," says Rob Reiskytl, partner for retirement consulting at Aon Hewitt.

Men who make it to 65 can expect to live to 82, on average, and 65-year-old women can expect to live until age 85, according to the Society of Actuaries. Health, education and family history play a role in your own life expectancy (to see how, use the calculator at www.livingto100.com), but no one can predict the date of your demise. Unless your health or family history indicates otherwise, set the age in the low-to-mid nineties or even higher, advises Michael Kitces, a partner at Pinnacle Advisory Group, a wealth-management firm in Columbia, Md.

For an easy but somewhat more precise approach to figuring your nest egg, Kitces suggests multiplying your estimated preretirement household living expenses by 25, after subtracting whatever amount you'd get from Social Security and pensions. This calculation assumes you'll withdraw 4% in the first year you retire and adjust that figure annually for inflation—an amount some planners consider low enough to keep you from running out of money even if you live to your mid nineties. For instance, if you plan to live on $5,000 a month ($60,000 a year) in retirement and anticipate $3,500 a month in Social Security benefits for yourself and your spouse (including spousal benefits), your net amount is $1,500 a month ($18,000 a year) and your rule-of-thumb savings would be $18,000 times 25, or $450,000. You can get an estimate of your Social Security benefits by using the calculator at www.ssa.gov. 

Reassess the numbers

Relying on broad savings benchmarks is fine for most of your working life, but "as you get closer to retirement, you need to have a plan that takes into account the unique characteristics of your finances," says Dan Keady, director of financial planning at TIAA-CREF. Five years out, he says, "look at what you're actually planning."

You might be surprised to find that you're in better shape than you thought. For instance, if you're on target to pay off your mortgage by the time you retire, you may not need 80% of your income to maintain your standard of living or, if you live in a high-cost area and plan to move to a cheaper one, "maybe a 60% replacement rate is fine," says Keady. Health, travel plans, housing arrangements and marital status all play a role in how your money holds up. Meanwhile, as you age, your expenses are likely to go down: A 2012 report by the Employee Benefit Research Institute shows that household expenditures fall 19% by age 75 compared with age 65, 34% by age 85, and 52% by age 95.

In any event, by the time you're 60 or older, you should have a handle on the savings and income you'll be working with, says Yanikoski. "You've been dealt all your cards. From now on, the issue is how you play them." You could decide to reduce housing expenses—say, by moving to a less expensive home. Now is also the time to consider whether it makes sense to invest some of your savings in an annuity for lifetime income. If your savings look skimpy, plan to work longer.

As for your standard of living, "we're trying to set guidelines that expect the same lifestyle," says Reiskytl. "But in reality, you may have to back off a bit." Cutting expenses doesn't necessarily mean you'll have to change your standard of living dramatically, he says. "When you talk to retirees and ask them how it's going, they typically say it's fine. Behind the scenes, they may be making adjustments to live within their means."

To help you determine how much you need to save and assist you in implementing a plan, talk to Shari Hopkins in the Coulee Investment Center. 

Source: http://finance.yahoo.com/news/what-s-your-retirement-number--154155550.html


Saving for Short-Term Goals

Pursuing short-term financial goals -- those that you'd like to achieve within one to five years, such as a down payment on a home or car -- can require a different strategy than pursuing long-term goals. Here are some steps to help you save and invest when you're going to need your money sooner rather than later.

  • Step 1: Be specific about your goal. Setting a specific short-term goal will help you to evaluate your progress toward meeting it. For instance, the vague objective "I want to save money to buy a house" becomes "I want to save $25,000 over five years to put toward the down payment of a house in (town/city)."
     
  • Step 2: Take steps to free up extra cash. How will you save the money that you need? Eating out less often, canceling a gym membership that you don't use, or downgrading your cable from a premium to a basic plan could easily free up $100 per month or more toward your goal. There are probably many areas where you can save a few bucks. Make a detailed list of what you spend in an average month and see where you could afford to trim.
     
  • Step 3: Match your investments or savings vehicles with your goal. Safety and liquidity will be priorities if you need the money within a few years. Stocks can experience extreme fluctuations over short-term periods. You don't want to be forced to sell your assets when the value of your investment has dropped. More appropriate choices for short-term needs may be conservative instruments that offer a more stable return, such as short-term bond funds and money market funds. Federally insured savings vehicles, such as certificates of deposit, could also play a role.

Understanding Short-Term Investments

Short-term bond funds primarily invest in U.S. government or corporate debt with maturities that range from one to three years. Money market funds pool investors' dollars to buy money market instruments. These types of securities aim to produce current income, offer liquidity (how quickly you can sell an asset), and usually aren't subject to the dramatic ups and downs of stocks. Certificates of deposit are interest-bearing debt instruments with a wide range of maturities. In exchange for purchasing a certificate of deposit, the investor will receive the return of principal plus interest at the maturity date.

Finally, remember that short-term financial objectives should not take away from investing for long-term goals.

Source/Disclaimer:

Investors should carefully consider the fund's investment objectives, risks, charges and expenses before investing. To obtain a prospectus, or if available, a summary prospectus containing this and other information, contact appropriate fund company or view the fund prospectus on Website of the appropriate fund company. Please carefully read the prospectus or the summary prospectus before investing.

Your investment is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Current performance maybe higher or lower than the past, which cannot guarantee future results.

Share price, principal value, yield and return will vary and you may have a gain or loss when you sell you shares.

An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these funds.

Bonds are subject to interest and market rate risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability and change in price

Certificates of deposit offer a guaranteed rate of return, guaranteed principal and interest and are generally insured by the FDIC (see http://www.fdic.gov/consumers/consumer/information/fdiciorn.html for additional information).

Early withdrawal of certificates of deposit may be subject to penalty.

© 2012 S&P Capital IQ Financial Communications. All rights reserved.

Source: http://www.ffscambridge.com/resources/article/three_steps_to_help_save_for_short_term_goals