Ask Money

A home in 5 years

Chris Farrell Sep 22, 2010

Question: My husband and I are paying our scheduled payments on our current home mortgage and student loans. We don’t have any other debt. We have emergency savings and both have retirement plans.

We’ll likely need a new house in about five years. Right now we’re underwater on our $130,000 mortgage, so it’s hard to say how the sale of our current home will go in five years, but we’ll certainly need some savings for a down payment. What are the best instrument for monthly deposits and a “planned” withdrawal in five years (give or take)? Rebecca, Minneapolis, MN

Answer: Maybe it’s the slight fall chill in the air, but I’m sitting at my desk wondering where did the summer go? Winter will be here in no time. I’m not ready yet.

Anyway, when it comes to money 5 years isn’t very long. For example, a rule of thumb I like is that money shouldn’t go into the stock market unless it can be left alone for at least 5 years. The stock market is too volatile for it to be a safe parking place for cash.

It pays to stay conservative when you have a particular goal in mind such as a down payment on a home within set time frame. In your case, I would investigate mutual fund portfolios made up of creditworthy short-term and relatively short-term securities. You could search for good CDs with a decent yield and put some funds into an online savings account. (A good place to look is

Investments like these suggestions offer the reassurance that the money will be there when you need it for a down payment. And, if you change your mind in the meantime, you still have money to invest in another opportunity.

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