Dear Harry: I have a very(?) secure job with a major company that I've had for more than 20 years. I have a good 401(k) plan that gets maxed out each year. We have three children, two of whom are still in school. I just received a settlement check of $90,000, which is now sitting in our checking account. We want to set it aside for emergencies so we can protect the 401(k). My salary is enough to give us a decent lifestyle, but we have very little in personal savings. Could you make a suggestion as to how to handle our windfall? My wife worries constantly about possible downsizing by my employer.
What Harry says: There is a lot of information about you that I don't have. As a result, recommendations have to be rather tentative. You have little in savings, so that's a big clue. Interest rates are still hugging the ground, so I'd like to stay relatively short term. Stick with absolutely secure investments in bank CDs. With our economy still in a state of flux, go for a three way split into a three-, six- and 12-month CD. Make sure you go for the highest rate at an insured institution. Consider credit unions as well as banks. You may have to make adjustments at the maturity dates of the CDs, but that's par for the course in supplementary savings.