I've been asked a lot lately about the best place to store cash in this day of low interest rates. David Bach gives some advice on this topic as he lists five ways to get the best rates for your money. His list:
1. Find out what the rate on your accounts has adjusted down to.
2. Go online and shop for a rate.
3. Look at CDs as an option to money markets.
4. Look at short-term corporate bonds and municipal bonds.
5. Look at short-term bond funds.
For me, I want immediate access to my cash and don't want to incur any risk with it (like you would have to with a bond fund.) So I keep mine in a Vanguard money market. It's easy to transfer to other Vanguard funds and easy to track (I don't have to get another set of statements mailed to me or check a new website to see my balance.) It earns close to what I could earn at the online banks, so for the advantages named previously, the small hit I take on return is worth it.
How about you? What are you doing with your cash these days?
Always shop for the best rates. I agree that I would want access to my cash so for me a money market would make more since. CDs and bonds tie up your cash and aren't as liquid as your mm's or cds. For some though it still may be their best choice.
Posted by: Moneyandpf | February 18, 2008 at 09:09 AM
Online savings accounts work for us, but you really have to keep an eye on the rates.
Posted by: Suze | February 18, 2008 at 09:51 AM
We have most of our savings in Vanguard money market as well. It's around 5% at last check and I have my Roth with them as well, so it's convenient.
We have our vacation savings fund at E*trade, due to them having no minimums to open an account. I started it with a credit card bonus check and send all those to that fund along with my expense checks from work, which are about $50-75 a month.
Posted by: Kevin | February 18, 2008 at 10:33 AM
money market or money market funds account? Big difference, in terms of the risk element.
Posted by: JACK | February 18, 2008 at 12:05 PM
My children receive U.S. Savings bonds for birthdays and Christmas. They have several hundred dollars in bonds. My banker suggested cashing them in early and putting them into something that would earn better interest or be a better investment. Would appreciate suggestions/comments about this.
Posted by: Kathy | February 18, 2008 at 12:44 PM
BECU money market right now. Saving up for a down payment, so I need the cash to be extremely liquid.
Posted by: LotharBot | February 18, 2008 at 03:51 PM
I'm currently saving my in PayPal. Their money market rate has been pretty competitive (until the last few weeks anyway). And it is completely liquid.
Posted by: Odnal | February 18, 2008 at 08:53 PM