I do not feel like the Helms’ $8000 liquid balance is adequate. First of all, the Helms’ bring home $5,000 on a monthly basis and only saved $8,000, which $7,400 is in a 3.5% savings account and $600 in a regular checking account. I feel like the Helms’ should have at least $20,000 - %25,000 saved and put away into the savings account with a 3.5% interest.
Even though 3.5% isn’t much, at least it’s safer that way and it’s a start. And that money is guaranteed in the event of a layoff. The Helms’ would be able to withdraw the monies without any penalties. The advantage of having CD’s is that the interest rate is higher than the typical savings account. But, at the same time the risk of investing your money into CD’s is that you are putting your money on hold and if you need to borrow money for whatever reason the Helms’ would be penalized for doing so.
At this time I don’t feel like the stock market is the way to go when it comes to investments. Unless the Helm’s are stock market ready, meaning keeping up with the stocks, and knowing when and how to switch accounts before the market crashes. I would recommend the Helms’ create a budget plan, to determine how to reach saving at least 3-4 months of their monthly income, and until they could establish that, just use a savings account for savings until they are ready for future investment.
References
Winger, B, J. and Frasca, R, R. (2006). Personal Finance: An Integrated Planning Approach. (7th ed.). Upper Saddle River, NJ: Prentice Hall....