Protecting Our Big Dreams Fund From Ourselves (and the Volatile Market)

Posted on November 21, 2008 by Him and tagged finances, interest, savings

Back in July when Her had a wedding shower, she setup an ING Direct subaccount named "Big Dreams Fund" so that we could stash our wedding gift money there.

And that's about how far we got. For the most part, our wedding gift money hasn't moved from our checking account. While we're pretty good with our current budgeting scheme, we're worried that the longer we wait to move our money, the more we may be tempted to spend it on hookers and blow (or unicorns and leprechauns).

We know ourselves pretty well, and we're definitely out-of-sight-out-of-mind kind of people. But because of the nature of this money, we thought instead of just sticking our money into an online savings account we'd go an extra step further to protect it from ourselves. To do that, we're going to setup a certificate of deposit (CD) ladder.

We're going to do this for a few reasons. First, CDs can be found that have higher interest rates than most online savings accounts. Second, as long as the CDs are insured they are a relatively stable short to intermediate term investment - a very good thing in today's market. Finally (an most importantly to us), there is a penalty for withdrawing the money before the CD matures. This last point is crucial for us to keep our grubby little hands off of it so that it can grow.

Hopefully our strategy now will let us truly realize our big dreams.

We're not going to explain CD ladders because it has been done much better in other places. For more information, check out the following:

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Susy | Nov 21, 2008

I am currently doing the same thing with my emergency fund and my Alaskan cruise fund.

ING also makes it super easy to set up CD ladders, they have a special place on their website specifically for it.

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FFB | Nov 24, 2008

CD's are definitely a great way to make your money a little less accessible. Sometimes seeing a large amount in savings can give you ideas of spending it. Putting the money in CD's gets it a little more out of reach!

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Grace | Nov 24, 2008

I blogged about you!

http://highfashiongirl.blogspot.com/2008/11/recessionistas-ultimate-guide-to_24.html

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PennySeeds.com | Dec 2, 2008

I love CDs, they're the perfect balance between liquid funds, and keep your hands off warnings.

The penalty is enough to force you to leave it alone, but not so solid that if you REALLY need it you can't get it.

I wish I could set my savings account into sections within the same account honestly.

ie. retirement, vacations, standard, ect. would be awesome to keep everything together, but seperate.

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