Final answer:
The housing counselor should suggest the client move the funds to a large purchase savings account with limited accessibility. This option offers a balance of higher interest rates compared to regular checking accounts and easier access without significant penalties compared to a long-term CD.
Step-by-step explanation:
The question revolves around the most suitable place for a housing counselor to suggest a client put her $45,000 from a life insurance settlement, intended for a future house down payment. When considering the purpose of the funds, the priority should be to preserve capital while earning a modest return.
Option B, moving the funds to a large purchase savings account with limited accessibility, usually offers a better interest rate than checking accounts and can be specifically tailored for saving for a home purchase. This will limit the temptation to spend the fund while earning some interest. It's essential that the client has access to the funds when needed without substantial penalties, which is why a certificate of deposit (CD) is less appropriate, due to the substantial penalty for early withdrawal.
Ultimately, since the client's goal is to use the money in the short to medium term for a down payment, they should avoid investments with high volatility, such as mutual funds, and choose a saving option that combines growth with accessibility.