Goldilocks and the Middle Chair

I write about the concept of balance a lot. And while equal parts yin and yang makes sense, I can't help but argue there's always a third piece to balance: where the two opposites blend.

It's like when Goldilocks found the first chair too hard and the second too soft. Even that breaking-and-entering miscreant understood the solution wasn't to sit in both chairs simultaneously. That story is about finding the right balance...and obtaining permission before eating a stranger's soup.

It baffles me that we only think in the short- or long-term, especially with our savings strategy. We know long-term savings usually takes on risk in exchange for potential gain. Contributing to a company retirement account ties your savings to the market, but with such a long runway we feel comfortable the growth will absorb the effects of the risk. And short-term savings hobbles along without much interest growth, even as rates rise. Our capital is safe, but the return is not exciting.

What about money we've saved where we want to protect the capital (aka never lose more than you put in) and generate better growth? Think about the money you're setting aside for a home down payment, gender-affirming surgery, or honeymoon. The purpose of this pot of savings is too precious...or the money was too difficult to save...to risk a single penny. You want it to grow, you won't need it tomorrow, but you want it liquid or easy to access.

Right now, as interest rates rise many banks are passing some of those additional earnings down to their customers. Marcus by GS and Alliant Credit Union are two institutions that offer competitive rates alongside their simple, sleek site & app designs.

Pay particular attention to the Certificates of Deposit (CD) at whatever banking institution you use/are considering. Not only are CDs wonderful for their additional earnings potential compared to traditional savings accounts, but many banks do not require large deposit minimums to open a CD. There is also the added flexibility of term length for the CD and laddering several CDs for additional liquidity:

Say Angelica saved $24,000 for a non-specified purpose exactly 2 years in the future. She may decide to place the entire amount into a 1-year CD at a 3% monthly compounding APR (this is merely an example). But in 18 months she needs $6,000 for a deposit. The two options are to withdraw $6,000 from the CD, taking the penalty, or to find $6,000 elsewhere that will then be replaced once the CD matures.

Alternatively, the Angelica could open that same 1-yr CD with $6,000 in January, again with another $6,000 in April, and so-on until then entire $24,000 is distributed. Now every quarter of the following year a fourth of the entire pot of money becomes liquid. When Angelica needs the $6K in 18 months, there's no penalty to accessing the cash.

Balance isn't just a talking point for me -- it's my actual goal for every person I meet. Sometimes balance is choosing between this or that. But sometimes it can be this and that.

Just something to think about.

2022-142849?Exp 9/24