22 Jun Earning more on your home down payment savings

 Q. Banks pay next to nothing and I am saving money for a down payment for my house. Where can I put it to earn more but still keep it safe?

A. You’re not going to like this.

Where can you put it and keep it safe? Nowhere, according to Jerry Lynch, a certified financial planner with JFL Total Wealth Management in Boonton.

“I get it, as everyone wants more, but the reality is when you put yourself in a position to potentially get more, you also have the potential to get less through market losses,” he said.

He said every financial product has risk. That can include interest rate risk, market volatility, currency risk, and more.

“With cash, the risk is inflation risk” Lynch said. “However, if the goal is to buy a property in a short period of time, don’t worry about it as it needs to be safe and liquid.”

Your time frame is very important here.

But without you saying so, we’re assuming you plan to buy the home in less than a year.

“If that is the time frame you are very limited as to your investment options based on your criteria,” said Altair Gobo, a certified financial planner with U.S. Financial Services in Fairfield. “If possible, every person would choose an investment that was risk-free, high return and liquid — and what about tax-free?”

Unfortunately, he said, that investment does not exist.

With such a short time horizon, Gobo said, you are limited to bank instruments such as Certificates of Deposit (CDs) and money markets, and Treasuries. They will all guarantee your principal for that period.

“Other investment choices — stocks, bonds, mutual funds, ETFs, etc. — may provide better returns over longer periods of time but are purely speculative if you have a one-year time horizon,” Gobo said. “In this case, you may have to sacrifice performance for safety and guarantees of principal.”

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This story was first posted in June 2015.