With interest rates and inflation rising, you might be wondering how to maximize your cash. The positive of higher rates is now you can now earn a decent return on your cash. To make the most of your money, let’s look into the following options:
High Yield Savings
One of the most convenient ways to invest your cash is by using a high yield savings account. These online banks don’t have branches to maintain, so they can offer better rates and fewer fees. Similar to traditional bank accounts, these are FDIC insured up to $250,000 and offer a safe place to put your money.
Currently, the best rates are around 5%. If you want to compare your options, a good website to check out is Bankrate.
Money Market Accounts and Funds
Money market accounts provide yields comparable to those of online savings accounts, but they come with added advantages. You can open these accounts at banks, credit unions, and brokerage firms. If you choose a bank or credit union for your account, you may have the ability to write checks from it and even obtain a debit card.
Brokerage firms provide the option to purchase money market mutual funds. LPL Financial, the custodian we use at PMG, has a money market fund yielding 5.11%. These accounts do not have FDIC protection, but instead have SPIC insurance up to $500,000 per customer.
Certificate of Deposit (CDs)
A Certificate of Deposit offers you a fixed rate of return in exchange for locking away your funds for a set period of time. The “maturity date” is generally between 3 months and 5 years. If you need the funds before the CD matures, you normally pay a penalty.
Similar to money market funds. You can purchase CDs within your LPL account. Rates range from anywhere between 4% to 5.5% depending on the duration.
Treasury Bills or Notes
Treasuries are backed by the full faith and credit of the United States government, which means that they are considered to be extremely safe investments. Treasury bills typically mature in less than a year, while Treasury notes often take between two and ten years to mature.
Treasury bills and notes offer a tax advantage as they are not subject to state and local taxes. You can purchase them through the TreasuryDirect website. Just like Certificates of Deposit (CDs), there might be penalties for early withdrawal before maturity.
Keeping your cash in an account that generates little interest means you’re missing out on the opportunity to grow your money. You don’t need to limit yourself one option; consider diversifying across the various options mentioned above. Compare the pros and cons of each to determine the best fit for your needs.
If you have any questions about these suggestions, don’t hesitate to give us a call or send us an email. We’re more than happy to answer any questions and provide any assistance we can.
Disclaimer / Sources:
High Yield Savings account rates from BankRate.
Money market rates based on PJLXX. 30 day SEC yield as of 9-18-23 from YCharts.
Certificate of Deposit Rates from BankRate.
Treasury Bills or Notes can be found at TreasuryDirect.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax advice.