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Dave Says: A Down Payment Is Not an Investment

by | Aug. 30, 2011

Finances

Dear Dave,

I’m saving up money to buy a house in the next couple of years. How should I invest this money before I actually buy something?

Candace

Dear Candace,

The problem is that you’re not really investing; you’re just saving. Investing means you aren’t going to touch the money for five years or more. If you may use the cash to buy something within five years, you’re really just kind of “parking” the money for a little while.

If it were me, I’d put it in a money market account. It’s basically just going to sit there and not earn much, but you won’t lose anything, either. If you’re lucky, you might see one percent interest in the short term, but that’s about all you can expect considering the low-interest rate environment we’re in these days.

—Dave

* For more financial help visit daveramsey.com.

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