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Cash is king

Question: I have about 30,000 dollars saved in a savings account that is giving me about 0.85% interest. I put about $ 800 a month into this account. This is truly saving for any emergency, or fun trip, etc.

We are empty nesters, and all the rest of or things are covered, like 401K fully funded, mortgage will be paid in 3 years, some investments, no other debts, etc. Husband has life and disability insurance. I don't work and my husband will retire in about 10 years
This is truly extra money "for a rainy day". I don't want to put it in a retirement account. Do you think a savings account is the best place to have it, or how should I invest it? I am a little worried with the things I hear about the financial market. Thanks. Laura, Dayton, OH

Answer: The financial markets are scary. The Eurozone crisis is in its 19th month and a resolution to its Mediterranean sovereign debt crisis seems still far off. The U.S. is somewhere between the brink of a double-dip recession, a slow growth downturn and negative economic growth. No matter how the economy is labeled, the anemic 103,000 expansion in payrolls for September is yet one more sign that the job market is stagnant. I share your caution.

A theme of these posts has been the soundness of accepting fractional yields in return for preserving your principal.

I would continue to put your "rainy day" fund into online savings accounts, certificates of deposit, U.S. Treasury bills and the like. By the way, your household balance sheet looks strong.

If your rainy day fund gets big enough you might want to consider putting some of it into a low-fee high quality dividend paying mutual fund. (Check out Tess' interview with personal finance columnist John Waggoner for some ideas.) I think it's a good move, but the investment will still be volatile in today's market climate.

The mantra for emergency savings these days remains, Cash Is King.

About the author

Chris Farrell is the economics editor of Marketplace Money.
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what exactly is a fully funded 401K? Is there a limit as to how much you can put in?

So totally agree. Contrary to what all the so called "experts" told us, starting about 8 years ago (at age 60) we paid off our home, cars and all debts and dumped money into our Credit Union insured CD's. We've watched people loose everything in the market and refinanced homes and count ourselves smarter then the investment professionals. We are now semi-retired and have a nice safe nest, financially and home life style. Sure, the CD rate could be better, but its a lot better then not having any money.

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