Should We Shift Some Emergency Fund Money to CDs?

by Kevin on September 10, 2008

ING Direct recently sent me an automated e-mail reminding me that they offer Certificates of Deposit (CDs). Not only that, but that the rates had recently increased.

Here’s a breakdown of the CD offerings as of this morning (effective since August 26, 2008):

  • 6 month: 3.75%
  • 9 month: 3.75%
  • 12 month: 4.00%
  • 18 month: 4.00%
  • 24 month: 4.00%
  • 30 month: 4.00%
  • 36 month: 4.00%
  • 48 month: 4.00%
  • 60 month: 4.25%

We currently keep our emergency fund with our other ING savings at 3.00%. This account is liquid, and we can access the money if we needed it very quickly. However, we have a lot of money saved up for various other goals. I think we’ve got enough to move some of our emergency fund from the liquid savings account and put it into a 6 month CD.

I’ve thought about doing CD laddering, but I really like the flexibility we get from the ING savings account. But if we can maintain some liquidity and earn a higher return… I’m tempted to say the least.

I’m only comfortable doing 6 months right now. If we locked in for five years you earn a higher rate, but there is a chance rates could go up. Of course, there’s a chance rates could go down, too. Being locked in for the long term at that point would be a good thing. However, if rates go down — or we have an emergency and need to pull the money out — you have to pay 3 months worth of interest back.

What would you do?

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