What Savings Alternatives Are Available?

As an investor, it’s important to have a portion of your holdings in savings. Opinions differ, but most financial advisors agree that adequate savings should form the basis of any sound investment strategy. There are a number of savings alternatives that will help you accumulate adequate savings and earn a reasonable rate of return.

Certificates of Deposit

Certificates of deposit are really just short-term loans to a bank, credit union, or savings and loan. They offer a moderate rate of return and more safety because they are insured by the FDIC for up to $250,000 per depositor, per institution in interest and principal.

Asset Management Accounts

These accounts are much like checking accounts, except that they may be held by a brokerage instead of a bank. You can use your money to trade stocks and bonds and buy into money market funds. Many brokerages will automatically sweep your earnings into a money market account.

Series EE Savings Bonds

For many years, when bonds were mentioned, people thought of U.S. savings bonds. Series EE savings bonds are sold in par values that range from $50 to $10,000 if purchased in paper form or from $50 to $5,000 if purchased electronically. Tax on the interest is deferred until maturity and may be eliminated if the proceeds are used to pay for a college education.

I Savings Bonds

These bonds are designed to offer protection from inflation. By linking the return of the bonds to an inflation index, the bonds are always guaranteed to earn a fixed rate above the inflation rate. They are a sort of hybrid between Treasury Inflation Indexed bonds (which are issued as marketable securities) and EE bonds. I bonds can be purchased at banks where EE bonds are currently sold or electronically. They are available in $50, $75, $100, $200, $500, $1,000, and $5,000 denominations. You can purchase up to $5,000 per Social Security number per year.

Money Market Funds

In a money market fund, your investment is pooled with that of other investors. The resulting fund is invested in a diverse portfolio of short-term debt securities. Money market funds offer a high level of safety and moderate income.

Money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in money market funds.

Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

Interest-Bearing Checking Accounts

These accounts combine the interest-earning capability of a savings account with the check-writing convenience of a checking account. They are offered through many banks, savings and loans, and credit unions. Some charge a fee if you fail to maintain a minimum balance.

Treasury Bills

Treasury bills are literally short-term loans to the federal government. They are sold at a discount off their face value in maturities of three months, six months, and one year. The interest on Treasury bills is exempt from state and local income taxes. Treasury bills are backed by the full faith and credit of the U.S. government as to the timely payment of principal and interest. The principal value will fluctuate with changes in market conditions and, if not held to maturity, T-bills may be worth more or less than their original cost.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2012 Emerald Connect, Inc.

Securities Offered Through ValMark Securities, Inc. Member FINRA, SIPC Investment Advisory Services Offered Through ValMark Advisers, Inc. a SEC Registered Investment Advisor 130 Springside Drive, Suite 300, Akron, Ohio 44333-2431* 1-800-765-5201. The Giles Financial Group is a separate entity from ValMark Securities, Inc. and ValMark Advisers, Inc.

PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. ValMark Securities, Inc. makes no representation as to the completeness or accuracy of information provided at these web sites. Nor is ValMark Securities, Inc. liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

Investors should consult with their own professional advisor regarding the potential tax, estate, and legal considerations that may arise in connection with entering into a life settlements transaction. Proceeds from a life settlement transaction may be taxable under federal or state law to the extent the proceeds exceed the cost basis. The proceeds from a life settlement transaction may be subject to claims of creditors. The receipt of proceeds from a life settlement transaction may adversely impact eligibility for government benefits and entitlements. The amount received for the sale of the Policy may be impacted by the circumstances of the particular purchaser of the Policy, the insured’s life expectancy, future premiums, the death benefit, the terms of the Policy, and the current market for insurance policies, among other factors. The amount received for the sale of the Policy may be more or less than what others might receive for the sale of a similar policy. There may be high fees associated with the sell of a Life settlement.

Any tax advice contained herein is of a general nature and is not intended for public dissemination. Further, you should seek specific tax advice from your tax professional before pursuing any idea contemplated herein. This advice is being provided solely as an incidental service to our business as a financial planner.