So the other day i was depositing some cash in my checking account, and the teller asked me why i didn't keep the money that was in there in some sort of CD. I told her I didn't really know much about them, and she tried to convince me to open one. Wanting to leave, i told her i'd look into it and then proceeded to give it no further thought until a little while ago.

Being 21 years old and never having had any real interest in investing of any sort outside of poker, it's suddenly dawned on me that i should start looking into ways to invest my money, outside of my normal checking/savings accounts.

So i figured i'd ask the best place i know of about my fiscal concerns- a forum full of regular liars, deceivers, and degenerate gamblers.

As of right now, i'm curious what to expect from a CD. or something similar. Lets say i want to put $25,000 into something like this. One of my big concerns is accessability. I don't want my money locked away for years on end, or even months in end. I had mentioned this to the teller and she told me that there were accounts that rolled over on a daily basis, and others that had no penalties for early withdrawls.

So what can you guys tell me about these? is it worth the time to set up? How much of a return should i expect for something like this? How much of a risk am i taking when i put my money there? And is there anything that you think sound slike a better place to put my money?


/edited and reposted below

let me rephrase part of this. Since there seems to be a few people saying 'invest in this' ' or invest in that', i need to point out, once again, that i am absolutely clueless in this whole area. The whole reason i started this thread was because someone told me to invest in something or another, and i really have no clue what it all means.

Can anyone actually *explain* to me what investing in a CD, or a money market, or a mutual fund, or any of that means? what kind of risk am i taking when i put my money into one of these areas? i understand that there are a variety of places to put my money and expect to be able to withdraw more than i put in, but in all honesty that's all that i understand.[/img]

CDs are a good place to hold your emergency funds (3-6 month's living expenses should be safe and liquid). Rates can vary, so shop around. A money market account from ING or other online banks often pay the same as a 6 month CD at a B&M bank. So shop around. Typically, the longer term on the CD, the higher rate it pays.

As for holding your emergency cash in CD's, this is how I do it:

Say you have 3 months expenses saved, and for you that is $12,000. Open a $2000 90 day CD, two 60 day CD's, and two 30 day CDs, all for $2000. Hold the other $2000 in cash. After 15 days, buy a 90 day CD with the $200 cash. Repeat this process when the 30 and 60 day CDs mature, buying 90 day CD's. Now you have six $2000 90 day CDs on a 15 day rotation. You can choose to have them mature once a month if you don't want to roll over your 90 day CDs every 15 days, but with this process you are never more than 15 days from $2000 in cash, and you are getting the 90 day rate on your CD.

Any money over and above your emergency fund should be invested in higher risk/higher reward diversified investments (stocks, mutual funds, metals, real estate, etc.) You are young and can tolerate some pretty high risk investments.

And this should probably be in the bankroll management section.

i have cash in a money market making like 4 something %. money is accessible at any time with no penalties. i think this is a great way to go if you feel you might need the money quickly. basically it works just like a savings.

I'm gonna move this to Bankroll, and would also like some ideas (sorry bout the minor hijack) about keepin money in for a year...

Ie... I'm moving to Vegas in January, and will have approx. $200k from my house selling in addition to whatever bankroll I may need... So, I basically have no use for that money for a year, until I decide to purchase a house over there... What're some good risk/reward type rates for a 1 year CD (or whatever else you could use to make a decent safe return)...

money market is basically a savings account so there is no risk unless the bank you're using goes bankrupt.

dan i am curious about your advice on mutual funds and any more info you could provide.

CDs are zero risk investments (unless the bank goes broke [or maybe even if it does, not sure]). They tie up your money for a specific amount of time. If you need your money out before that time is up, you will pay a fee that's probably greater than the interest you would have received.

So basically I hate CDs and have never bought one. Online savings accounts have higher rates than most CDs anyway. If you go with an online CD you'll get an extra half a percent or so, no way that's worth it to me unless I have money I am 1000000% positive isn't going to be needed.

Money market funds are a lot like savings accounts, but tend to pay a tiny bit more interest. You can get your money out at any time from these, just like a savings account. I'm trying to remember what the trade-off is for the teeny extra bit of money you get. I think that unlike savings accounts they're not insured by the FDIC ...?

Bottom line is if you're leaving thousands in your checking account you're a moron. At least move it to a savings account. Grab one of the online ones and get that 5 percent or so. 50 dollars per year per thousand you've got sitting around isn't huge if you only have a few thousand, but it's free money.

And if you happen to have $200,000, then 5 percent is 10 grand a year. Important stuff. I suppose in that case an extra .5 percent could make a pretty big difference, so it might be worth looking into a CD if you are really sure you don't need the cash for an entire year.

If you are brand new to investing, you should learn from the fool. www.fool.com.

Check out for short term investment vehicles, and the pros and cons of each.

Hi All -

Just a couple of additions - the rate you see on a CD is usually annualized, so if you only buy a 6 month CD at say 5%, expect to only really get back 2.3%-2.4%.

CDs should pay higher rates than savings accounts because they are less liquid (its harder to get your money out before the term expires)

Investments of this type (money markets, Cds, etc) are covered up to $100,000 by FDIC - so if you plan to invest more than that, use more than one bank.

One final piece of advice - don't put money into a CD if you think there is any chance you will need it before the term ends. If you wanted to invest say 10k - I'd invest 5k for 6 months, and then 3 months later invest the other 5k and then reinvest as the money becomes available - this way you will have the opportunity to withdraw 5k every 3 months, instead of 10k every 6 months. the only thing you miss out on is the first 3 months of interest on the 5k.

On a side note - if you have 200k lying around in a money market account - you should 1 - learn about financial management - or hire a financial advisor - if you were a client of mine I could easily get you 8% a year in liquid corporate bonds that have essentially no risk. 5% on 200k per year gets you $10,000, 8% is $16,000 and I think $6,000 is a lot. Evenmore, investing in a variety of things could easily bag you on average of 12%-15% a year and now we are talking about $24,000 - $30,000 a year - a full ~$20,000 more than just having it in CDs or a money market account.