Where to put capital project savings?

[Josh Lyons]

When you have a stash of money for capital projects such as repairing a roof or something that will happen every five or 15 years or so, where is the best place to save that money so it is doing a little bit of work for you? Of course you want to keep it liquid so you have it when it is time to replace something. But at the same time you want to get as much interest as you can. Is it best to have it in the highest interest savings account that you can find which of course would only be one or 2%?

[Jaysen Medhurst]

Really depends on your risk tolerance, @Josh Lyons. You could keep it in index funds, H.I. savings account, or  bonds/CDs. A prudent approach may be something like:

• 20% (or a fixed amount) cash
• 50-60% index funds (with a stop order at 95% of value to minimize downside risk)
• 20-30% bonds/CDs with 1-2 year maturity dates that overlap every 6 months. Municipal bonds are particularly attractive due to the tax advantages.

That should be plenty of liquidity. You can supplement that with a LOC for short term use and pay it back when bonds/CDs mature.