Alternatives for small savers

I'm having $25 a week deducted from my paycheck and deposited in a local bank at 5 1/2 percent interest annually. As I collect $1,000, I want to move it out into something better with higher earnings and fairly quick access to my capital. I have access to a credit union, but I'm wondering if there is anything else. -- S.W.

You're practicing what I tell the little bag-big bag operation. You collect funds in a little bag until you have enough to invest in something else with reasonable commissions and fees. You have already read, I presume, about money market mutual funds. Currently, they are probably your best bet for higher earnings and immediate liquidity.

The credit union you mention should increase your earnings by at least one percent, but you must watch your timing for withdrawing funds, or you could lose much of the accrued interest. Certificates of deposit with 90 days or one-year maturities also offer more yield in return for tying your cash up. I don't recommend more than the 90-day CDs because of the volatile nature of the interest markets these days. You could also buy income stocks -- particularly good now with interest rates still high but coming down. Income stocks could yield around 10 percent. but, for insured small savings, there is little available that you don't already know about.

I'd suggest the money market mutual funds as your best bet. For a free list of money market mutual funds, write the No-Load Mutual Fund Association, Valley Forge, Pa. 19481.