Another personal finance question.?

Question:

Marcia and Phil Helm, a couple in their thirties, have been married for several years. They have no children, and each has a professional career. Marcia is a trainee for a management position at a large department store, and Phil is an engineer at an electronics firm. Their careers have promising futures, but neither has exceptionally good income protection in the event of a layoff. The Helms have saved around $8000, and $7400 of it is in a 3.5% savings account at the credit union where Phil works. They have about $600 in a regular checking account (with Mid-City Bank) that doesn't pay any interest. The Helms' combined take home pay is about $5000/month, and Phil thinks they should take the $7400 out of their savings and invest in the stock market to earn a better return. He points out that, excluding their life insurance policies, they have no other investments. Marcia thinks this plan might be too risky, but she does agree that the 3.5% yield is not very good.

Recently, at a party, a friend suggested they take out certificates of deposit (CDs) with long maturities because the CDs were paying around 6% in interest. The Helms liked her advice and stopped at Phil's credit union to get more information on the CDs. After talking with the office manager for a while, though, they became more confused. He didn't favor CDs; although, the union had them available. He pointed out that interest rates on the new money market accounts were around 4% and didn't require "freezing" your money for a year or more. He also indicated that the union could offer a super NOW account that would allow the Helms to close their current unproductive checking account with Mid-City. This account would give them unlimited check writing privileges with no service charges and would pay 3% interest; however, it would require a minimum balance of $2500. If their balance went below the minimum in a month, interest would be only 2%.

The Helms left the credit union without taking any action. They have asked you for advice on managing their liquid deposits.

In 3-4 paragraphs, answer the following questions.
Do you feel the Helms' $8000 liquid balance is adequate? Explain.
Explain the relative risks and potential advantages of CDs. Explain under what condition(s) you would recommend them for the Helms.
Do you agree with Phil that some of their funds should be invested in the stock market? Explain.
What are your recommendations for a cash management plan for the Helms?

Answer:
Depending on their spending habits they should put the money in an emigrant direct or ING money market account. They should keep that money for emergencies and really should try to get it up to at least $10000 or preferably $15000 just in case something happens. Emigrant direct currently pays 5% apr ING is about 4.5%. This way it doesn't have to be tied up for a year or more and can be transfered electronically into your account if needed in about 3-5 days. Once this emergency fund is where you would like it to be, start investing everything else you have left over each month on higher yielding stocks.

Another personal finance question.?

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