Someone recently asked me what her daughter should do with the cash she received as Bat Mitzvah gifts. In the past, the answer was easy. You invested in an index fund or some other mutual fund and let it grow slowly until it was needed for college or a down payment on a home. But now, parents and newlyweds are terrified to go near the stock market. After all, how will mom explain to her daughter than she lost half the dough on GE stock?
A better option: Go safe with a CD or high-yield online savings account, now paying around three percent. Sure, they don’t have nearly the attractive rates they carried just two years ago — remember six percent? — but at least you or your child can make something on the money while waiting out the storm.
If you’re a bit of an optimist (read gambler) you’re probably thinking that your youngster could miss out on some great market recovery. That’s true. At some point the market has to rebound. But that could take years. In the meantime, you’ll have peace of mind… and your son won’t curse you for blowing his windfall.
Before you deposit the money in your local bank, shop around for the most competitive rate. Here are some websites that can help you:
- Bankrate.com — best yields on one-year CDs
- Bankrate.com — best yields on online savings accounts
- SavingsAccounts.com — high-yield, FDIC-insured accounts
- MonitorBankRates.com – high-yield accounts, CDs plus banking news
Bankrate has a rating system that can help you find financially sound banks. Also make sure accounts are FDIC insured.
Image via Flickr user DavidK-Oregon, CC 2.0
