Skip to comments.Dave Says: Interest Rates Donít Mean Much When Youíre Saving for an Emergency
Posted on 12/03/2013 9:00:40 AM PST by Kaslin
Im in the military, and my wife and I have $13,000 in the bank along with $35,000 in a Roth IRA. We also have no debt, and we put $3,500 into our savings account each month. Our new baby is due to arrive in January, so do you think this would be a good time to buy our first home?
Based on the market alone, its a great time to buy a house. Interest rates are fantastic, and prices are recovering but still buyer-friendly. However, considering your wifes delivery date and the fact that it takes a while to find and complete the process of buying a home, I think Id wait on this. Moving is stressful enough under normal circumstances, but combining that with a pregnancy could shoot your wifes stress levels into the stratosphere. I really dont think you want to do that to her. And speaking as an old married guy, its something you dont want to experience, either.
Another thing to consider is if theres a good chance youll be reassigned in the next four or five years. We work with the military a lot, and that means we see people who buy, and get stuck with, homes all over the country. These places usually become rental homes because they dont sell quickly. And this is a situation you want to avoid because being a long-distance landlord is a real pain.
If everything falls into place, you could easily have enough set aside for a big down payment a few months after the baby arrives. At that point, things will feel a little more settled. I know the temptation is great right now to move into a place you can call your own, but you want buying a home to be a blessing, not a curse. Take a little more time, and see how things feel career- and family-wise in a few months. Thats my advice.
Is it better to keep your emergency fund in a certificate of deposit or a money market account?
Right now, a short-term certificate of deposit (CD) pays about the same as a money market account. The problem is youre only going to make about 1 percent with either one. The good thing about a money market, though, is that there are no early withdrawal fees attached.
In my mind, an emergency fund isnt there for the purpose of making money. It needs to just sit safe and sound until its needed. It should also be in a program where its easily accessible and there are no stupid fees or penalties for simply using your own money.
So, yeah, savings interest rates right now are aggravating. But you dont have 3- or 4-percent-home-mortgage world without a 1-percent CD world. They kind of go together. Just remember that interest rates arent the end game when it comes to your emergency fund. You want three to six months of expenses just sitting there, waiting for life to happen. Trust me, it will!
I don’t remember military pay being enough I could put $3,500 a month into savings.
Penalties are charged from interest earned. Not from the principal.
If you need the money are you really worried about a penalty? If they take the whole 15 Who gives a red rats patoot.
My money isn’t in a rainy day account, it’s in a safe insured place . Right now the interest isn’t crap. Under normal conditions it should be earning 7% at least , by Normal I mean when we have a real President , and a Government that is for the people instead of against them.
When the bank starts charging me for holding my money I will buy fruit jars and hide it in the garden.
Well said, but please be aware that they are very likely to Cyprus us. They will avoid a bank run by declaring a bank holiday when no-one is expecting it.
We need to be mostly out of the bank and into fruit jars (or whatever) before a long weekend that changes the world.
When my husband and I married in 1962, his pay was around $200.00 a month as a Spec4. Tom is probably an high ranking officer
Yeah, I was wondering where he's got that much disposable income. I'd be beyond ecstatic to save $500 a month. I'm hoping right now that I can avoid eating into my savings in 2014 - as a best case scenario.
You have a good point.
I do believe we will have some warnings before that happens, but it could happen at any time.
The safety of the money is my main worry right now, and even a safe at home isn’t safe with todays thieves. Then again if the police served a warrant on your home and found a large stash of money —say 45,000 dollars, they could take it and say it was drug money and you might never get it back.
I assumed the guy (officer ? noncom ?)was living on base
and that his wife probably had a decent job-
Saving $3500 a month? I would stay put-
having a baby -REAL soon!- you will need all the cash
and then some!
That’s what caught my eye...plus he’s only accumulated $13,000. Maybe it shoud read $350.00
My Friend is a Naval Officer, one child, and a wife who does not work.
They do not own a home - his assignments make that a virtual impossibility - though he did buy a duplex that is managed for him seven years ago or so.
I’m certain he puts away more than $3,500 per month.
When he retires he has several VERY high paying opportunities awaiting him.
A few more years, God willing.
He has to be an officer, and I would guess Major or above...military pay for enlisted to Captain is still pretty low. Enlisted in the Army to about E-5 have wages low enough to qualify as poverty and below and qualify for social services if they have a spouse and at least one child and the spouse doesn’t work.
I heard back in the late 90’s that newly minted Border patrol agents and those with less than 6-8 years made below poverty level in California.
I know they were poorly paid in the late 1960s, because that is when my sister married a BP agent right when he got out of the academy. They struggled for a while- his first assignment was Bakersfield, California and they lived in a trailer park. He had a college degree and still made low wages when he started.
He stayed with the government but transferred to Customs and became an agent with the horse patrol (CPO then before they did away with that) then later Air Branch before he retired so he ended up doing quite well.
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