Safe Sound by Bradleystephens


                B Y A L E X A N D R A K AY

                Create a strategy to keep your savings
                secure in this uncertain economy

                Marcy Levy knows stocks and bonds. Still, when the personal-finance writer
                and her husband, Mitch, decided to start a rainy-day fund, they chose a money
                market account that would give them easy access to the cash—and avoided testing
                a volatile stock market. “While I know there are other times when we might invest
                in the market, right now we feel the money market account is the safest, smartest
                option,” Marcy says.
                    The Levys aren’t the only family choosing extra security over a chance for bigger
                returns. Experts say that the downside of a volatile market—the potential for large
                losses—keeps many people on the trading sidelines as they plan a savings strategy.
                “Typically, when the Dow and equity markets are declining, customers will sell
                their stocks and put their money elsewhere to keep it safe,” says Ron Riebe, Product
                Manager at KeyBank. “And that money frequently ends up in accounts such as

                money markets and certificates of deposit [CDs].”

                    As the U.S. economy tightens, many consumers will continue to think twice
                about risky investments. But if you want to avoid stuffing cash under the mattress—
                where it won’t earn you any interest, after all—CDs, money market accounts or U.S.

                Treasuries might be the perfect solution. Each of the three options offers unique
                fi nancial benefits, and they are all safe vehicles for a variety of savings goals, from
                your child’s education to the down payment on your next home. The challenge lies
                in planning a strategy that meets your fi nancial needs both now and in the future.

                SLUG TK                                                                                                                     SAVING
                BY JOHN DOE

                                                                                     IF YOU NEED              Consider a Certificate
                                                                                       A SET RATE             of Deposit
                                                                                       OF RETURN                CDs usually offer better interest rates
                                                                                                                than money market accounts, depending
                                                                                     on the length of the terms, and are FDIC insured. Longer-
                                                                                     term CDs pay higher interest rates, but your money is locked in
                                                                                     for a specific time period. CDs can be purchased in increments
                                                                                     that typically vary from a few months to a few years. (KeyBank
                                                                                     offers CDs with maturities ranging from seven days to 10 years.)
                                                                                         “CDs work well when you know why and when you’re going
                                                                                     to need the money,” says Mark Joseph, a certified fi nancial
                                                                                     planner and C.P.A. in Reston, Virginia. If you plan to purchase
                 IF YOU NEED                 Consider a Money                        your next home at a certain time, keep your down payment
                TO KEEP YOUR                 Market Account                          and closing money in a CD to earn a good rate of return. A
                 CASH LIQUID                Money market accounts are a great        CD can also be a smart choice if you are nearing retirement
                                            option if you’re not sure when you       and want to minimize risk while maintaining a fi xed-income
                will need access to your money. “The interest rates may fluctuate,   stream. Consider “laddering” your CDs—buying a variety
                but the money is liquid and readily available,” Riebe says. So       with staggered maturity dates—to keep the cash coming in.
                while the interest rate isn’t guaranteed and isn’t as high as on
                some other options, you will likely earn more than you would          IF YOU ARE             Consider U.S.
                in a typical savings account. Thus a money market account is          EXTREMELY              Treasuries
                ideal for emergency savings like those put aside for unexpected      RISK AVERSE              U.S. Treasuries, which include savings
                medical expenses. “Bank money market accounts are generally                                   bonds, Treasury notes, Treasury bills and
                FDIC insured, so safety is a perk,” adds personal-fi nance expert    TIPS (Treasury Inflation-Protected Securities), are a safe bet.
                Eric Tyson, author of Personal Finance for Dummies.                  All have different rates of return based on product and maturity
                                                                                     dates. Treasury bills mature in one year or less, notes mature in
                                                                                     two to 10 years, and bonds mature in 30 years. Usually, income
                                                                                     from Treasuries is exempt from state and local taxes.
                Business Benefits                                                        Bonds and notes can be a valuable part of your retirement
                Small business owners can also plan their                            plan if you’re most concerned with safety. Just remember that
                                                                                     they generally pay lower interest rates than CDs, depending
                financial strategies with these instruments
                                                                                     on maturity dates, because they are more conservative invest-
                Keep operating capital working for you with a money                  ments. “The risk is even less because it’s assumed to be risk-free,
                market savings account. “A money market account can                  but the return is less too,” Riebe says.
                be a good vehicle for a business owner to keep excess

                cash rather than leaving it in a savings account,” Eric

                Tyson says. Money markets have transaction limits,
                though, so be aware of the terms.                                                      KeyBank Gold Money
 16                                                                                                      Market Account
                  On the other hand, if you have cash earmarked for a

                specific purpose, you can earn a greater rate of return                    Park cash in a safe place and earn a competitive interest
                                                                                          rate with our Gold Money Market Savings Account. Visit
                with a CD. A CD won’t work for day-to-day expenses
                                                                                 or call 1-888-KEY-1234 to learn more.
                but could hold savings such as a fund for a computer
                upgrade or a store renovation, Mark Joseph says.


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