Certificate of Deposits
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Another popular short-term savings alternative is U.S. Treasury Bills. T-bills are issued and backed by the U.S. government and are always sold at a discount. That means you purchase then for an amount less than their face value. They come in maturities for three, six, or 12 months and with face values in increments of $5,000, starting with a minimum of $10,000. As with CDs, typically the longer the maturity of the T-bill, the higher its yield; one-year Treasuries often yield about half a percentage point more than three months T-bills. You’ll often find T-bills yielding one to one and a half percentage points more than what you’d get on the average bank CD with the same maturity. Best of all, the interest on T-bills is exempt from state and local taxes, which can boost your after-tax yield.You can buy newly issued Treasury securities through a bank or brokerage for a commission of $50 or more. To save that expense, you can send your money directly to the Treasury with a form that you can pick up at Federal Reserve Banks and branches. You’ll need to open what’s called a Treasury Direct account. For more information, get a copy of the booklet Buying Treasury Securities at the Federal Reserve Banks (send a check for $4.50 to Buying Treasury Securities, the Federal Reserve Bank of Richmond, P.O. Box 27471, Richmond, Va. 23261, or call the U.S. Bureau of the Public Debt at 202-874-4000). Three-month and six-month T-bills are auctioned every Monday; one-year T-bills are auctioned every fourth Thursday.
T-bill rates rarely change dramatically from day to day, so you can get an idea of what the new bills will pay by checking yields of similar securities under the “Money Rates” heading inside the Wall Street Journal. You will get the full face value of your T-bills as long as you hold them until maturity, but if you need to sell them earlier, you’ll be at the mercy of whatever price someone will pay for them.
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2 Responses to “Certificate of Deposits”
The rates right now on CD’s happen to be low. Do you think one should keep their money in a money market account instead? The rates are probably close to equal and are liquid.
Craig
http://www.budgetpulse.com
By
Craig (Who am I?) on Dec 3, 2008
I personally am looking into an annuity. The interest rate in about 5%-6% and I can have my money over time, which is a lot better than 2-3% now.
By
debt relief (Who am I?) on Dec 5, 2008