That’s a question that a lot of people ask while in debt. Dave Ramsey, possibly the most popular debt counselor, recommends that you stop ALL retirement saving while eliminating debt. He argues that it gives you a huge advantage because you have a lot more money for your debt snowball.

I am a little more liberal when it comes to this rule. I think that it should be based on some other factors as well. For example, our current pile of debt is so large that we will be missing out on 5+ years of retirement saving (the amount of time it’s going to take us to pay off this debt). When you add compound interest into the equation, it means that we would be missing out on a lot more money. Let me give you our situation as an example:

I currently work for the Government and am offered a 5% match for money I put into the Thrift Savings Plan (fancy government word for 401k). That means that for every dollar I put into the plan, they match me 100% up to a 5% of my income. That’s a guaranteed 100% return on my money and I can invest it in any of their funds. However, if I didn’t contribute to the plan, I would miss out on that free money. Plus, I would miss out on 5+ years of compound interest.

Now, I am going to put some numbers to the scenario. Let’s say I start putting 5% of my income (plus the match) into the plan starting today (age 25). By the time I reach age 70, I will have almost $2.5 million in the account assuming an 8% return. Now, if I wait 6 years (best case scenario for debt repayment) and start investing the same amount per year, I will only have $1.7 million in the account. Still not bad, but almost $800,000 less than if I would have started at 25. Here is a graph of this example:

So, as you can see, starting to save for retirement 6 years from now instead of today will cost me about $800,000 in retirement savings by age 70. Am I really going to pay that much more in interest by not stopping my contributions? I don’t think so!

So, I guess the question is, when should you stop contributing to retirement in order to clean up your debts? Should you do it if you can get the debts paid off in 2 years or less? 4 years or less? What is the magic number?

All I can say is, I am not missing out on almost $800,000 in retirement growth to save MAYBE a couple thousand in interest charges.

What are your thoughts on the subject? Can you think of any reasons why I should be STOPPING my contributions?

Post by Frugal Dad

You ever notice how there are older people that don’t know the first thing about the world of personal finance, yet they seem to be experts at saving money? These people have also not heard of personal finance gurus, such as, Dave Ramsey or Suze Orman, or even Frugal Dad. Yet they still save money. They don’t read personal finance blogs nor do they ever want to listen to a full personal finance podcast.

Photo by eyg2158

Many of us twenty-somethings are completely lost sometimes when it comes to personal finance, yet we have all the information about money management available to us within a few clicks. We have a lot to learn from older generations when it comes to saving money.

How do these old school people manage to save money? What are their money saving tips?

They follow the “pay yourself first” mentality.

Instead of waiting for the end of the pay cycle, these ambitious individuals put their money away as soon as their paycheck comes in.
Whether they choose to invest in CDs, mutual funds, risky stocks, online savings accounts, or keep it under their pillow is irrelevant. Savings come first. Bills come second. Third is the necessities of life. Whatever is left over is used to enjoy life a little.

The key takeaway is that savings are always done first. Before you buy that new cologne it’s imperative that you have reached your set savings target for that pay cycle or whatever deadline you have set for you financial goals. If not, then the new bottle of cologne is going to have to wait.

They live below their means.

Not a revolutionary concept but a getting rich slowly basic that needs to be reinforced into all of us. These people are usually the millionaire next door that drive the car you would never dare step foot in because it’s embarrassingly ugly. They will never be the nicest smelling person in the room nor will they wear the most expensive pair of shoes.

These old school money savers understand how much money they earn and their lifestyle is directly proportionate to their income. If they earn $50,000 a year before taxes, they will likely not go all out and buy a BMW. They simply don’t see the need to acquire debt for a car (or home for that matter) that doesn’t fit their lifestyle.

They avoid external influences.

Advertising does have an affect on everyone. However, it is more severe on certain individuals. The old school money savers are less susceptible to fall victim to new age marketing techniques. How come? Because they have everything they need in life and don’t go looking for more. Sure they may occasionally splurge and buy something they really don’t need all that much. At the end of the day these scenarios are few and far in between.
Impulse purchases are kept to a minimum.

You have to work for their money.

It is fairly easy to extract money from most of us. The old school crowd feels that everything is a scam. They do not want to hear your sales pitch. They will not even humor you by pretending to listen to the sales pitch. You have to work your butt off to get your hands in their pockets.
You will have to sell something really good at a bargain price to get into their wallets.

At the end of the day we have a lot to learn from these old school folks (don’t worry guys I’m not calling you old, just old school).

Are there any other old school money saving tips that I missed?

What have you learned from older generations about saving money?

Post by Frugal Dad

Any post about saving for early retirement should first define the author’s meaning of “early” and “retirement.” Combined, these words are typically understood to mean walking away from paid employment earlier than the traditional retirement age. I guess I agree with that broad definition, but I’d like to take the definition a little further before getting into the actual numbers.

What Does Early Retirement Mean To Me?

The older I get, the more my definition of retirement changes. When I was young, I envisioned retirement as a time of leisure, where older people traveled to exotic locations, took cruises, and when they weren’t traveling, played golf, went fishing, and generally enjoyed a life of leisure.

Of course, now that I’m older, I recognize this is not how the average retiree’s years are spent. Unfortunately, thanks to the Great Recession of 2008, many soon-to-be retirees saw half of their retirement saving disappear. This has lead many retirees to hang on to their jobs, or return to other types of jobs (often times lower paying) than the careers they had for most of their adult lives. This is a sad reality for many, and a cautionary tale for the rest of us.

For me, early retirement is all about options. Living without the worry of needing to work a traditional 8-5 job frees up many opportunities for more worthwhile ways to spend time. For us, that means doing some travel and doing more things with our time to make a difference in the lives of others, particularly young people. We married young, had kids young, and skipped over the period in our lives where we would be able to do these types of things, so we’d like to recapture a bit of that after the corporate grind is completed.

Saving For Each Phase of Retirement

Uncle Sam has dictated retirement for many people to mean age 59 1/2 (the age you can tap most retirement accounts without penalty), or 62 (if you plan on receiving early benefits from social security). Personally, I use neither of these age milestones as a guide, and plan to save in such a manner that I can experience freedom from paid, full-time employment long before reaching 59 1/2.

To identify the types of savings we’ll need to have in place to meet our own milestones, it’s best to work backwards from the next upcoming event. In this case, let’s start with early retirement at 47 years-old, some 15 years away.

Phase I: Early Retirement on Taxable (and Tax Free) Savings

Over the next 15 years my wife and I plan to maximize both our Roth IRA accounts, and my 401(k) through my employer. Using the current maximum contribution levels for Roth IRAs, this would provide $150,000 in contributions. Remember, Roth IRA contributions may be withdrawn at any time, without tax or penalty. Assuming we plan to live on about $50,000 a year, this would only last 3 years, barely getting us to 50 years-old.

A better plan would be to use taxable savings to bridge the 12-year gap between 47 and 59 1/2 (the age we can begin to withdraw from retirement accounts).  We’d only need about $600,000 in savings outside of retirement accounts to pull this off. Only. I laughed at myself after writing that.

Pretty tough to carve out $600k in savings in the next 15 years (even earning a modest 6.5%) while maxing out retirement accounts, funding college savings, and meeting our previously mentioned short-to-medium range savings goals. Not like we have an extra $25,000 a year sitting around to invest.

So the numbers appear unattainable, but the exercise was still worthwhile. It provides us with some real feedback for the variables we set, and we can now tweak those inputs to determine the impact. For instance, if we delayed early retirement just three years to age 50, we’d have another $30,000 in Roth IRA contributions. Our taxable nest egg required to fund the gap from 50 to 59 1/2 would drop to $500,000, and since we’d have a little longer to save, we would only have to divert $1,200 a month to taxable savings. The $1,200 a month figure sounds eerily similar to an average mortgage payment, doesn’t it?

When you break the numbers down this way, two things become apparent. First, early retirement is not just a pipe dream, if you are a disciplined saver and avoid debt. Second, I sure wish I had started this plan 10 years ago!

Up next – Retirement Savings Phase II: Drawing from the Nest Egg

Post by Frugal Dad

We have all heard of SMART goals. You probably know the acronym by heart…Specific, Measurable, Achievable, etc. Identifying savings goals is no different. As I mentioned last week when first introducing this series, my family has been pretty good at saving money since getting out of debt. However, we find ourselves trying to pile up money for no specific reason, other than we recognize saving money is the smart thing to do.

This wasn’t enough for me. I want to set very specific savings goals and then track them to completion. When we accomplish the first savings goal, we’ll move to the second. When we accomplish that goal, we’ll move on to the next, and so on. Think of it as a “savings snowball.”

Of course, some goals will run concurrently, particularly the big, long-range goals such as retirement and college savings plans for the kids.

To kick things off, my wife and I sat down to identify our short-term savings goals. That is, things we hope to accomplish in the next year or two, or have already saved for, but don’t want to tap for competing priorities.

Short-Term Savings Goals

Goal 1: Save $25,000 Cash for Emergencies. Any financial planner will tell you this is the cornerstone of any solid savings plan. After all, rainy days are inevitable. Whether you are covering the costs of a new roof, a new transmission, or covering expenses during a layoff, the emergency fund is a must-have savings goal.

Most also agree that 3-6 months of expenses is a good starting place when determining how much one should save. For us, our goal amount is around eight months of expenses – we added two additional months since we are a one-income family.

Goal 2: Save $10,000 Cash in an Opportunity Fund. The problem with emergency funds is that they are only supposed to be used in an emergency. Life throws plenty of opportunities, too, and we want to be prepared for them. In our first 12 years of marriage, we had to pass on many opportunities because we were carrying debt and had little savings. We like to think of this fund as our personal line of credit – there to use and replenish as opportunities arise.

One real-life example of these types of opportunities is blogging conferences. Previously, the attendance fee, transportation and lodging made attending these types of events difficult. Now, if the right opportunity came along, I could attend such an event, which could lead to making valuable connections for building Frugal Dad.

Goal 3: Save $10,000 Cash Towards a Car Replacement Fund. Let’s face it; our cars won’t last forever. Their demise is inevitable, no matter how well we take care of them. So why not begin planning for their replacement now, rather than turning to banks or auto finance companies.

In our case, my truck will likely die first since it is several years older than our family vehicle, and has about 100,000 miles more on the engine. At current prices, I could buy a replacement truck for about $8,000 – $10.000. Accounting for a little inflation, with the hopes that my current truck lasts a few more years, and accounting for the remaining cash value of my current truck, that puts the replacement truck cash need at about $10,000.

Goal 4: Save $5,000 for Home Improvement Projects. Our house was built in 2004, so fortunately very little is in need of upgrading. However, there are a few small home improvement projects  we are interested in doing around the exterior of our home, such as installing gutters, paving a patio (or building a deck), and planting more mature trees on the property.

We’re also considering hardwood or laminate flooring in the kids’ rooms as they both suffer from allergies, and carpet seems to hold in the dust and pet dander making their symptoms worse. A few thousand dollars should cover these expenses, but we believe in saving the cash first before upgrading the home, even if other lines of credit are there.

I’m happy to report that Goal 1 is accomplished, and we are working on Goal 2 (the Opportunity Fund). We’ll save for goals 3 and 4 at the same time, with the hopes that our outside home improvement projects will be funded by late spring or early summer, and our new trees can be planted in the fall.

Stay Tuned

Next up in the series, we’ll take a look at college savings for our kids, our next big savings priority and something we know we are behind on. I’ve done some preliminary research for the costs of tuition for both kids, and the numbers are staggering. I’ll share the specific numbers with you, and our plan for reaching the goal in the next decade (even less time for our oldest – yikes!) just in case they don’t land full scholarships. Hey, a frugal dad can dream, can’t he?

Post by Frugal Dad

I felt pretty good about myself. We have already maxed out Roth IRAs for 2010, and now we were maxing out the 401k at my job. To celebrate, I decided to skip the brown bag and head out for lunch. And then it hit me like a glass of cold water smacking me right in the face. Why did I just sign up to have $16,500 in annual salary diverted into retirement savings? Aren’t there other things I could do with that money?

I guess you could call it ”saver’s remorse,” and I had it bad. I choked down my lunch while trying not to think about how much lighter my next paycheck would be. I replayed the events in my head and it finally occurred to me that I had made the move in an effort to sort of pat myself on the back. Hey, look at me…I’m maxing out my 401k!

My gut reaction was to fly back to work and withdraw the form before payroll started siphoning away hundreds of dollars from my check. However, since I was already guilty of one emotional decision that day, I decided to let it go and reflect on what I would do with that money.

Saving With Purpose

After starting Frugal Dad two years ago I started day dreaming of trading in the corporate badge for a full-time writing career. Unfortunately, a couple things stand in the way of that dream. First, I’m not a particularly great writer. Second, I don’t make quite enough here to replace my full-time income. And finally, we have many aggressive financial goals that require more than a modest income to fulfill. Indirectly, these goals have prevented me from making the leap to a full-time blogger. And for the first time in a while, I don’t resent that fact.

My savings goals, like many others, have always been rather nebulous. Saving for retirement, or kids’ college expenses, or even a “rainy day” have no real definition. It’s like saying, “I need to lose weight.” I finally accepted the reason I’ve been floundering, financially, even after paying off debt, was because I never actually sat down and identified my savings goals. I was starting to do smart things with money, but only because they sounded smart – I never applied them to our situation and made the goals personal.

Just think of all the “smart” advice we hear from financial gurus. Save 15% of your income for retirement. Put 3-6 months of expenses aside for emergencies. Pay off your mortgage early. The list goes on. But none of these instructions come with a “why.” Why are we saving 15% of our income towards retirement? What are we going to do when we get there? Why 15%? Why not more…or less?

Take some time to reflect on why you are saving money. Your list should be comprised of both short-term and long-term goals, from saving for next year’s Christmas shopping, to funding a retirement still 20 or 30 years away.

A New Series Here at Frugal Dad

Beginning next Monday, I plan to share some of our personal savings goals with you in a series I’m calling, “Saving With Purpose: How To Live A More Intentional Financial Life.” It’s my hope that by sharing our goals with you, I might inspire you to put pen to paper (or finger to keyboard) with your own goals. As the saying goes, “If we aim at nothing, we’ll hit it every time.”

Post by Frugal Dad

The first thing we did after reaching debt freedom was realign our financial goals. The first, of course, was to secure a fully-funded emergency fund, one that represented about six months of expenses. Admittedly, it was tough to keep up the same intensity towards saving money as we had for paying off debt. That brings me back to the thought-provoking comment left by Rob from PassionSaving.com. Here’s a portion of that comment that struck me:

If your experience is like mine, it won’t be all smooth sailing from this point forward. I say this not to be discouraging, but to point out what might be a basic reality of human life — it is a journey of ups and downs no matter how skilled one becomes at handling one’s money issues.

What I believe today is that accomplishing a big money goal like paying off one’s debt does not so much solve all your problems as open you up to a higher class of problems. The old problems truly are solved. But solving them provokes you into taking on new adventures, which lead to new problems. You will continue to find yourself frustrated and stuck and in pain and in fear in days to come.

My initial reaction? Yeah right! What could possibly be any more painful, financially, than going through the motions of paying off debt? What money struggles could we face that are even close to the struggles faced in the past? I suspect most people still deep in debt probably had that same reaction. But as I thought more about Rob’s comment, and began to experience life after debt, I understand his point.

Yes, we no longer have to contend with debt, but that doesn’t mean more daunting financial challenges aren’t ahead. My oldest child will soon be ten years old, which apart from terrifying me as a father, also serves as a wake-up call to get her college savings in order. Because we spent so many years toiling with debt and trying to get on solid footing, her college savings have suffered. The good news? Without debt we can afford larger contributions to her 529 plan, which should help us make up ground.

It’s a similar story for our own retirement plan. I diverted money we could have, and probably should have, used for retirement savings to pay down debt. Unfortunately, this means we missed a great opportunity to invest in our 20’s and let that money compound for a few decades. Are you reading 20-somethings? Make long-term savings a priority now!

In the final analysis, I would have to admit that yes, life is easier after debt. Paydays are now an exciting event because it means making more contributions to savings, rather than distributing most of your income to credit card and auto finance companies. But life after debt is not without challenges. And those challenges can conjure up the familiar fears and anxiety felt when looking at a pile of debt.

How will I even save enough to retire? How much will my kids need for college? Will I ever be able to save in taxable investments to chart a course to early retirement? I’ll approach these new challenges the same way I approached, and overcame, the ones related to debt. We’ll tackle them head on, and remain disciplined through the same frugal approach we take towards nearly all of life’s ups and downs.

Post by Frugal Dad

We currently have a number of sinking funds established in an online savings account for things like Christmas shopping, vacations and insurance premiums. We also continue to save towards a fully-funded emergency fund of six months of expenses. However, I feel compelled to save towards a new goal.

Opportunity Fund

Ever had the chance to take a last-minute trip you wanted to take, but didn’t have the money for it? Maybe it was to attend a conference on a subject you are interested in, or to visit a place you have wanted to visit since childhood. With an opportunity fund you would be able to answer when opportunity knocks.

I am reluctant to use our savings for any reason other than what the money is intended to cover. For instance, I don’t dip into our emergency fund if I find a great deal on a new laptop, and I don’t pull money out of the Christmas Savings account to buy the kids a bike in June. For the same reason, I personally find it hard to take advantage of opportunities outside of the monthly budget, and outside of our targeted savings goals. Here are a few examples of occasions to use an opportunity fund:

• Last-minute travel deals
• Clearance prices on household supplies to stockpile
• Pay cash for real estate (this is more of a “someday” goal)
• Giving. How many times have you wanted to give money to a neighbor or loved one, but didn’t have any to spare?

Why Not Use a Credit Card?

Many people simply carry a credit card for covering life’s opportunities, which borders on impulsive spending, and we all know impulsive and credit cards don’t mix. Until I’ve reached debt freedom, I’ve sworn off credit card use. For now, I find it too tempting to swipe a credit card and pay it off. I still need the transactional pain of paying cash or watching it immediately leave my checking account through a debit card.

So, I think of an opportunity fund as sort of my own personal line of credit, except I don’t have to adhere to credit card issuers’ ridiculous rules and be subjected to their frequent rule changes. It is empowering to seize the moment, pay cash, and not have a debt following me around long after.

Where to Save For Opportunities

My wife and I have decided to park our Opportunity Fund in one of the top online banks at ING Direct. The money accumulates at a slightly higher rate of interest than at a traditional savings account, and I’m a big fan of their online interface and transfer options. If something comes up, we can transfer money to our checking account in only a couple days, or simply write a check from our local emergency fund and replenish it from the Opportunity Fund. Either way, it’s nice to have some cash on hand specifically for an opportunity- most of the time it doesn’t knock twice!

Post by Frugal Dad

Online savings banks were all the rage just a couple years ago. It wasn’t unusual to score a 4 or 5 percent interest rate on online savings accounts. Today, the “high-yield” from high-yield savings accounts has all but been obliterated. Still, there are a few good deals at the best online banks, if you no where to look.

If you are like me, and have only a modest amount to save, one of the following online banks might be your best bet. I’ve listed them in no particular order after the first one (ING DIRECT is still my personal favorite, despite their relatively low interest rate).

EverBank (2.25% intro, 1.51% APY for the first year). EverBank’s Yield Pledge Money Market Account offers the highest interest rate of the bunch. The 3-month introductory 2.25% APY is an even sweeter rate, but it only lasts those first few months. There are a couple limitations to consider. EverBank requires a minimum deposit of $1,500, and in any month where your balance drops below $5,000 you face an $8.95 fee. That shouldn’t be a problem with most fully-funded emergency funds, but it is worth noting.

ING DIRECT (1.30% APY).I’ve had an ING Orange Savings Account for over two years now, and have to say I am very pleased with the product. We currently have a number of accounts there for targeted savings goals. While higher interest rates can be found elsewhere, I value the ease-of-use from their online interface.
 

WT Direct (1.51% APY accounts + $10,000). WT Direct also offers a solid interest rate, but with more caveats than other banks. While they do not require a minimum deposit, or charge fees based on your balance, they do offer a lower tiered interest rate for accounts with less than $10,000 (1.66% APY vs. 0.15%APY). If you have over $10k in your emergency fund, WT Direct is a solid option.

Ally Bank (1.49% APY).The high-yield savings account at Ally Bank is a very attractive option, with no fees, no minimums, and no convoluted tiered rates based on your balance. Another nice feature is that they compound interest daily, rather than monthly or quarterly, as many other banks do. Ally Bank is also a leader in high-yield CDS, which provides yet another option for a portion of your emergency savings (check out the no-penalty CD to avoid paying fees to transfer money out in an emergency).

Again, the most important benefit of saving emergency fund money at an online bank is that is separated from your everyday accounts, limiting the opportunities to spend it away on non-emergencies. I still like the idea of keeping a local emergency fund of $1,000 or so tucked away at a local bank or credit union for smaller emergencies. This smaller, local emergency fund provides quick access without having to wait a couple days for online transfers.

*APY figures quoted are accurate as of 11/25/2009, but variable rates can change frequently

Post by Frugal Dad

She took the tops off those old shoe boxes and I remember peering into them and seeing roll after roll of quarters, nickels and dimes. She had whole boxes dedicated to pennies. There was easily a few hundred dollars in change under her bed.

The Coin Collector’s Christmas Club

“Nana, what are you saving all those coins for?” “For Christmas,” she replied. My grandmother didn’t work outside of the home after my grandfather retired from the Marines. Fortunately for her, my grandfather is a cash-only kind of guy, opting to spend cash over charging on credit cards (these were the days before debit cards were made popular).

He would come home after a trip to the store and empty his pockets on the top of his dresser. That’s when my grandmother swooped in and collected any loose change and was off to add them to her coin bank. She did leave a little pile of change my grandfather referred to as his “walking around money.” He always liked to keep a little change in his pocket.

After that summer of helping my grandmother roll coins I went with her to the bank where she cashed in over $300 in rolled coins. Part of the reason she took me along was to reinforce the habit of savings, but I really think she needed help carrying in those old shoe boxes!

Saving Coins in the 21st Century

Fast forward twenty-plus years. My kids now enjoy saving coins. Both of them have little electronic money jars that keep a running balance – something I’m still not sure about. While it is fun knowing you have $52.00 in change in your coin jar, just knowing that makes you want to cash it in for that $50 game you’ve been eying.

One of the things we struggle with now is finding a more efficient way to cash in that change. Some banks and credit unions have a change counting machine where you can dump in your change and make a deposit to your checking or savings account. Others require the change be rolled, and some even require you write your account number on each roll (have you seen the length of some bank account numbers these days?).

The very act of counting the change is time consuming, and most electronic sorting banks are expensive – the cheap ones never get the count right, or drop dimes in your penny column, etc. Of course, there is always those Coinstar machines. I admit I’ve carried along a jar of money or two to Kroger and dumped it in the Coinstar machine to put towards the grocery budget. Yes, I know it charges me an 8.9% fee, but considering how long it takes to count and roll the money, isn’t this worth it?

Coinstar does offer an option to redeem your change for an gift card or eCard (list of participating merchants) without adding the fee. But then you have to buy something online, pay for shipping and wait. 8.9% doesn’t seem so bad after all.

Are you a coin saver? Where do you keep your coins, and how do you cash them in?

Post by Frugal Dad

Here’s my situation: my car is 7 years-old with only 60,000 miles on it. It’s in good condition and definitely dependable; I plan on using it for another 5-10 years (five being the least). I figure that after 7 years of saving I would have about $8,400 plus the trade in value  for my car  – we’ll say that’s $1,000 for a total of $9,400.

My question is what do to with those savings? I don’t want to just let them sit there in my savings account, although it does have a decent APY of 1.40%. Should I put a sizable chuck into a 5 year CD and then continue to ladder it in CDs of decreasing term lengths until I need  the money to buy my car? Or should I just put it in a money market account, or higher yield savings account?

I want to maximize the money earned on that fund with out totally sacrificing my ability to withdraw it should an emergency come up, or I need to buy a new car sooner. What would you recommend?

John also shared with me that he is nearly debt free and will begin this car replacement fund after building a small emergency fund. Normally, I would recommend investing money that is to be used greater than five years out in a mix of fairly conservative mutual funds, such as a broad index fund with a low-fee brokerage like Vanguard.

However, this case is a little different because John is dedicating these funds as a car replacement fund. As such, the need to use these funds could arise any time between now and the six or seven years he plans to save. My own experience with Murphy’s Law leads me to believe John’s car will die the exact moment there is a market downturn, causing John to pull out savings at precisely the wrong time.

Instead of dabbling in a risky market, I would suggest parking the savings in an online savings account or money market account, and possibly a CD. I’m hesitant to fully recommend a CD because John mentions the possibility of tapping the funds in an emergency. To do so, he’d have to pay a penalty for cashing out the CD before the term expires.

Sometimes we have to sacrifice a little earnings for peace of mind, and I think this is the case with John’s car replacement fund. I’ve taken the same approach with my own set of sinking funds and targeted savings accounts. For now, they are stashed away in an online savings account at ING Direct.

Funds I don’t plan to use for a number of years will soon be laddered in CDs to increase the rate of return slightly. I’m comfortable reserving market investments for long-term saving goals.

Do you have any additional advice for John? Where are you currently parking savings for large purchases?

Post by Frugal Dad