Thursday, October 4, 2007

Shuffling my savings around

HSBC responded to the Fed rate cut by cutting the rate they offer on online savings to 4.50% apy. The mortgage crisis has the potential to get much, much worse, and it could be a long fall indeed if consumer confidence plummets in response. At this point, I'm guessing at least one more rate cut will be forthcoming in an effort to stave off recession. I don't know enough to determine whether that will have the desired macroeconomic effects.

I do know that it has a less than desirable effect on my finances. High interest rates are pretty nice when you have no debt and keep essentially all of your money in savings accounts. To avoid the fun and excitement of watching interest rates drop still lower in the coming months, I've decided to move approximately two thirds of my savings into certificates of deposit. At this point, I think I'll split the money equally among 6, 9, and 12 month cd's to build an instant ladder. That will leave just over $5000 in my savings account separate from the money I anticipate needing for living expenses. That seems like plenty of liquid cushion for now.

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