Playing With House Money

Andrew and his wife are debt-free and saving for their first home. They have $75,000 in savings. Where should they place this money so that it's working for them while they save?

QUESTION: Andrew in Daytona Beach and his wife are newly debt-free and saving for their first home. They have $75,000 in savings. They would like to buy a house with cash. Where should they place this money so that it’s working for them while they save?

ANSWER: Unless you’re going to leave the money alone for five years, which it doesn’t sound like you’re going to, you might put some of it in something like a balanced fund. The biggest portion of this money is not going to be due to growth; it’s not going to be in there long enough. You want a wise and safe place to park it and pile it up while you’re getting ready to buy this house.

You would technically have access to this money in a mutual fund. You can get money from your mutual fund in about 72 hours or less, depending on the fund. Access isn’t the problem. The problem is the volatility of the market. By the time you find a deal on a house, the market may have dove down that week. Stuff that is out of your control affects the market sometimes.

I don’t play the market on the short term. If I were in your shoes with a two- to four-year window, I’d just pile it in a money market.