Listener Letters: Credit Scores, Emergency Savings Madeleine Brand checks in with Day to Day personal finance guru Michelle Singletary, who answers listener questions about improving credit scores and saving for emergencies.
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Listener Letters: Credit Scores, Emergency Savings

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Listener Letters: Credit Scores, Emergency Savings

Listener Letters: Credit Scores, Emergency Savings

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Sony may need a team of experts to help sort out its finances, but for our listeners, we have only one: DAY TO DAY's own financial guru, Michelle Singletary. She joins us now to answer a few of your money questions.

Hello Michelle.



BRAND: Okay, first question from a listener.

(Reading) “My fiancé and I expect to start a family in several years by adopting two children. We are fortunate enough to have an adoption fund to pay the legal and other fees associated with adopting children. What do we do with the money in the meantime? We don't expect to touch it for two-and-a-half to three years. Should we put it in a money market account, a CD, or another type of investment?”

SINGLETARY: That is such a good question. And it's a good question not just for their adoption fund, but for anybody who has an emergency fund that they intend on using in a relatively short period of time.

First of all, you do not want to invest this money. If you need that money in five years or less, you don't want to put it at risk. So any one of those that they suggest would be a good place, you know, recognize that a savings account isn't going to pay you a lot of interest; same thing with a money market deposit account. So you might want to look at a money market fund account, which is different. You need to know that it's not FDIC insured. And I like certificates of deposit, and one strategy you could use to earn a little bit more on that money is to ladder your CD. So you might buy a three month, a six month, a year, and a two year CD so that you've got some money coming due, in case you need it before that three or five year period.

BRAND: What about bonds?

SINGLETARY: I think bonds are a good idea. You want to make sure that they're short-term, however. In their case, adoption money, but your emergency money should be something that you can turn into cash fairly quickly. So you don't want to lock it up in something that is going to cost you fees to get out or it's going to take a while to liquidate.

BRAND: Okay, and we have this question.

(Reading) “I am a single person that currently is maxed out on credit cards. I'm not always able to make the minimum required payments. I'm considering going to credit counseling. Do you think that these organizations are a good solution for someone in my situation and can this do any harm to my already declining, probably non existent at this point, credit score?”

SINGLETARY: I think with the right credit-counseling agency, it definitely can help you. For one thing, it will take the stress off having to deal with all those creditors. And many of them will put you on what's called a debt management plan. So they take all your debt, they negotiate with the creditors, and they set up a payment plan so you can make one payment to them. They then take that money and send it to your various creditors.

You need to be extremely careful when you select one of these companies. Look for one that charges low fees, say, maybe a $50 setup fee and then maybe $25 a month to put you in the debt management plan. I would suggest you go to if you are looking for a credit-counseling agency.

BRAND: Also another credit card question from a listener.

(Reading) “If you have several credit accounts open and are paying them all off, is it better to leave those accounts open after they're all paid off or close them? I'm wondering if closing them will affect my credit score?”

SINGLETARY: You definitely want to leave those accounts open and here's why. I know it sounds contrary to what you might have heard, but one of the major things that affect your credit score is length of credit. So as you're paying them off, you still want to keep them open, particularly if you're trying to build up your credit score.

BRAND: Okay, good advice. Thank you, Michelle.

SINGLETARY: You're welcome.

BRAND: Michelle Singletary's latest book is, Your Money and Your Man: How You and Prince Charming can Spend Well and Live Rich. And if you have money questions for Michelle, please send them in. Go to our web site,, click on the Contact Us link found at the top of every page, and be sure to include Michelle in your subject line.

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