Yes, the savings is adequate.
The money would be adequate for investment in the certificate of deposits in most banks and other financial intermediaries. For example, the US Bank require a minimum amount of $500 to open a certificate of deposit account , implying that the Helms $8000 liquid balance is adequate.The major advantage of the certificate of deposits is that they are fixed term investment schemes which relatively have short period to maturity. Therefore the investments are protected against interest rate fluctuations while most intermediaries do not charge transaction fees (NAB, 2007).
The CDs also normally offer higher rates of inters t due to the agreement by the investor to keep money with the financial intermediary over a predetermined period when compared to the traditional savings accounts and also has very minimum chances of default due to guaranteed returns. The repurchase agreement clause in most CDs may result into the intermediaries acquiring them at a lower price than the purchase price, hence loss. Similarly, the intermediaries may fail to honor their obligations upon maturity.
According to SEC, there may be complex procedure in investment in Certificate of Deposit and risks as manifested in difficulties to get the returns on time and locking in an attractive interest rate, (SEC,2008).I would recommend to the Helms to purchase the certificates of deposits if they are negotiable, flexible and their maturity dates do not exceed six months. The negotiability feature would ensure that the Helms can off load the investments whenever market appear to be slumping beside the resultant liquidity.Yes, I support advice to buy stocks. Sometimes due to market vitality, the financial institutions implement variable interest schemes to cushion themselves against risks, a situation which may leave the Helms at a worse situation. Investing n stocks would also advance the risk management strategy in investment which advocates for diversifications of portfolios to mitigate cross industry risks. However choice of low risk stocks coupled with readiness invest in long term securities need to be considered.
I would recommend that the Helms choose investment strategies that are suitable to their situations i.e. wisely invest their savings as a family.
They need to employ the services of a personal finance expert. At the same time, the cash management plan need to consider the risk management approach through portfolio diversification , the type and history of the investment managers or institutions as well as investments mentoring and evaluation.ReferencesSEC. 2008. High-Yield CDs – Protect Your Money by Checking the Fine Print. RetrievedFebruary 17, 2009.Available Online: < http://www.sec.
gov/investor/pubs/certific.htm>NAB.2007. Negotiable Certificate of Deposit. February 17, 2009.Available Online:<http://www.nab.
com.au/wps/wcm/connect/ffbea5804bc610bca537b72345045098/nc_ncd_pds.pdf?MOD=AJPERES&CACHEID=ffbea5804bc610bca537b72345045098.>US Bank.2008. Certificate of Deposit Agreement; Truth-in-Savings Disclosure.
February 17,2009.Available Online:<https://fastapp.usbank.com/fastapp/en_us/termsAndConditions/TandC/CdDepositAgreement_SavingCurrent.jsp>