Lisa this one's for you!

So my first finance question comes from a good friend of mine here in the Fairbanks area.

The question is basically this:

“What if I have a large sum of money in my bank account that I’d like to earn decent interest on but that I’d like to still have access to?”

Here are my thoughts, there are so many different answers to this question depending on your willingness to take risks. Here are a couple things to keep in mind.

How liquid do you want your cash? Liquidity – is basically the convertibility of investments to cash in hand.

           

            And how much risk you want to take…

            High risk usually yields high return and low risk usually yields low return.

Therefore if you leave your money in the savings account at your bank it is low risk (risk that you could lose your money) but also you will yield a low return on your investment. Something in the neighborhood of 0.10% interest (depending on your bank or credit union or where you live)

Another option is to set up a high yield saving account, or money market. These offer easier access to your money while at the same time earning a higher interest rate. The highest interest rate I have found for a high yield savings account was with Discover bank at 1.15%.  Ally bank also offers pretty competitive rates.

CDs (certificate of deposit) usually offer higher interest rates but you are committed to leave your money in them for a certain period of time (usually 6 months to a few years) so they are not very liquid. Most banks and credit unions offer CDs .

However it is doubtful that any of the above options will keep up with inflation, but it they will keep your money more easily accessible and relatively safe.

If you feel like investing, there are many options to invest your money. If you don’t want to go to a broker, you can do it on your own through a Scottrade or Etrade account. The bonus of this is that you can potentially receive a very high return on your money (high return), but it can be quite risky... (you could loose your shirt.) Every site has their own fee structure, for example Scottrade charges $7  per trade (every time you buy or sell stock). You can link it to your checking account and that makes it pretty easy to buy and sell stock.

Before purchasing stock I would definitely do some research, I have referenced the Motley Fool, and I keep track of my current investments as well as stocks I am researching through the “wikinvest” app which is free at the iTunes store.

Hopefully this has been helpful, keep the questions coming!! Email - notsoboringfinance@gmail.com