Cash

[scrabbler1]

This discussion is very similar to those we have about Emergency Funds.


I keep about $2,000 in my local bank's checking account. That includes a buffer of at least $500 above the amount to avoid monthly account fees to cover small, unforeseen expenses. I get 12 monthly and 4 quarterly dividends from bond and stock funds which pay the bills with anything left over and not needed to carry forward to a "lumpier" expense month getting invested somewhere.


Although not cash, I keep $40k in an intermediate-term muni bond fund. It has checkwriting privileges so it is more easily accessible in a pinch. It earns about 2-2.5% and is mostly tax-free.

 

[VanWinkle]

2.07% rewards checking account up to 30,000, and rest of cash is in Vanguard MM and short term treasuries.

 

[ShokWaveRider]

About $3,000,000 in greenback dollars and gold buried in mason jars in the back years....

Your Address??

 

[Oz investor]

Your Address??

don't bother , probably has a pet tiger or alligator ... and tells you that to lure in some food for the pet

 

[Cobra9777]

We only keep 3% of the portfolio in cash. Most of it is at Ally, currently earning 1.8%. We use a Fidelity cash management account for most of our normal banking activity. We hold some cash there as well, currently earning about 1.6% (FZFXX).

Only other cash is $1500 we park in a Wells Fargo checking account. This gives us access to brick-and-mortar services and we use it occasionally to transfer money to/from the kids. The $1500 balance is needed to avoid fees.

 

[swakyaby]

Where do you stash cash?

I have a few hundred in a local credit union, and somewhere between 10-20 thousand in a vanguard money market account.

I keep about $2,000 in my local bank's checking account.

Although not cash, I keep $40k in an intermediate-term muni bond fund.

These threads helped me with the inertia of keeping too much cash in a lowly earning bank account. Only last year, I was keeping $180K in a Wells Fargo account earning next to nothing. Now it's down to $50K with $200K in Vanguard's Prime Money Market (2.05% interest). Like Scrabbler, I also hold an intermediate-term muni bond fund because it's a fairly liquid way to hold additional assets in a tax-friendly way.

I hold $50K in my bank to give me peace of mind that if I were suddenly hospitalized in an accident or otherwise temporarily incapacitated, the household bills and utilities would continue to be automatically paid as well as my credit cards for a period of time.

 

[sengsational]

I'm not doing very well. 1% on 10K of HSA funds (but there is a fee to move it to brokerage, so I do it every other year), 1.56% on 10K cash inside the Roth (will be gone next rebalance), and worst of all is $35K getting 0.35% at the credit union. They have a 30 transactions a month game that would be too hard to play. The CU gives it's customers a kick-back in January, though. The magnitude depends on your deposits and loans. For years I got $100, but lately it's only been $50. Doesn't come close to the $600 or so (.02-.0035)*35K that I'm not getting. But it's my billpay account, so moving it would be a pain.

 

[mickeyd]

PMMF is what I use for cash/cash-like money stash. I think it has a SEC yield of around 2.06%.

 

[GravitySucks]

don't bother , probably has a pet tiger or alligator ... and tells you that to lure in some food for the pet

Tiger chow isn't cheap!

 

[njhowie]

I'm not doing very well. 1% on 10K of HSA funds (but there is a fee to move it to brokerage, so I do it every other year), 1.56% on 10K cash inside the Roth (will be gone next rebalance), and worst of all is $35K getting 0.35% at the credit union. They have a 30 transactions a month game that would be too hard to play. The CU gives it's customers a kick-back in January, though. The magnitude depends on your deposits and loans. For years I got $100, but lately it's only been $50. Doesn't come close to the $600 or so (.02-.0035)*35K that I'm not getting. But it's my billpay account, so moving it would be a pain.

I don't think you should be concerned with returns on the HSA money - just that the administrator of your account isn't skimming ridiculous fees.

The key with HSA is that you already received the tax deduction for the contributions, so you're well ahead of the game from the start. HSA administrators are notorious for charging high fees and giving low yields on funds kept with them. Some do offer brokerage options...for an additional fee and/or certain account funding minimums. If your HSA is getting any kind of yield after fees, then don't read anything more into it...that's fine.

Consider moving your Roth. Many places will give you a cash bonus on day one just for moving it. Your benefit, additionally with getting a better yield would be in excess of the short-term hassle of changing the bill pay.

I don't believe it's worth getting too worked up about not getting the absolute highest yields out there. Where we are today is significantly better than any time during the past few years and all indications point to at least another 6 months of increasing rates. Seriously consider moving what funds you can. Very soon, 2% is going to be near the low end for FDIC insured high yield saving accounts. Customers Bank (PA -but available to anyone online) is now at 2.25% on their FDIC insured money market account.

If you are extremely reluctant to moving the funds away from your credit union, then inquire about their best CD rates. Certainly you don't need the entire $35k available immediately and picking up the lowly 0.35% yield. Many credit unions have special CD rates. See what they are offering for 1 or 2 years - maybe put $10k into a one year and $10k into a 2 year, leaving $15k at the 0.35% rate for easy accessibility. But the CDs should easily be able to get you 2%-2.5%.

We have an account for our daughter at AMEX getting 1.75% in their high yield savings. I briefly considered moving it out to another bank offering 2.0% for the savings account. However, AMEX has 2.4% for 18 month CDs. At this time, it's nothing to get excited about. However, the ease of clicking a button and moving funds that aren't needed short-term from 1.75% up to 2.4% is unbeatable. Again, check the CD rates at your CU and ask if they are offering any specials.

 

[Dtail]

We only keep 3% of the portfolio in cash. Most of it is at Ally, currently earning 1.8%. We use a Fidelity cash management account for most of our normal banking activity. We hold some cash there as well, currently earning about 1.6% (FZFXX).

Only other cash is $1500 we park in a Wells Fargo checking account. This gives us access to brick-and-mortar services and we use it occasionally to transfer money to/from the kids. The $1500 balance is needed to avoid fees.

If your combined cash at Ally and Fidelity is at least 100k, perhaps consider moving all that cash to the Fidelity FZDXX money market account which is close to 2%.
You don't have to keep the 100k in the account, just open it with 100k and then you can reduce it to whatever monies. Then you could move your Ally monies back into the Ally account and effectively have converted your Fidelity rate from 1.6% to 2%.

 

[The Onceler]

I keep about $3k in cash and $5M in tulips

 

[audreyh1]

I don't believe it's worth getting too worked up about not getting the absolute highest yields out there. Where we are today is significantly better than any time during the past few years and all indications point to at least another 6 months of increasing rates. Seriously consider moving what funds you can. Very soon, 2% is going to be near the low end for FDIC insured high yield saving accounts. Customers Bank (PA -but available to anyone online) is now at 2.25% on their FDIC insured money market account.

Yeah, really.

Make sure you have plenty that you might need very liquid - like in high yield savings with a reasonable rate, MM funds with a good rate, or other options like no-penalty CDs also with a good rate. Then work to invest any excess in higher yielding CDs. Pay attention to the associated withdrawal penalties that give you an out if you have a surprise need or miscalculate.

With my credit frozen I'm really not willing to open new accounts at this point chasing yield. In fact, I hope to eventually whittle it back down to maybe a brokerage and one high yield savings account beyond a couple of checking accounts.

 

[audreyh1]

If your combined cash at Ally and Fidelity is at least 100k, perhaps consider moving all that cash to the Fidelity FZDXX money market account which is close to 2%.
You don't have to keep the 100k in the account, just open it with 100k and then you can reduce it to whatever monies. Then you could move your Ally monies back into the Ally account and effectively have converted your Fidelity rate from 1.6% to 2%.

Or buy the 2% 11 month no penalty CDs at Ally ($25K min for that rate)? That's what I did instead.

 

[Red Badger]

DW has about $40-50K in safety deposit box (and prob several grand stashed in the house). Me? About a grand at the CU and ~$300 in the wallet.

 

[Oz investor]

normally keep very little cash ( apart from the bank-note and coin collection ) and NORMALLY have very little in the bank ( or bank deposits )

i need my funds working hard ( so cash may spend a week or two in the bank before finding a better parking space )

i also worry about ( cash ) assets being frozen in stressful times by the banks .

being frugal is a BIG help ( keeping bills to a minimum )

 

[Winemaker]

Tiger chow isn't cheap!

It's getting rid of the old clothing is the issue,.

 

[googily]

Trying to decide if I should break a one year Ally CD at 2%, which doesn't mature until April, and just move it to Vanguard's prime money market. (EWP is two months.)

PMMF is what I use for cash/cash-like money stash. I think it has a SEC yield of around 2.06%.

 

[Koolau]

I used to chase yields on cash - back when you could get 4% or 5%. Now, it hardly seems worth the effort, even though we probably average $10K to $20K in the checking accounts. The money comes in and goes out. Trying to maintain a balance (to get a decent % on checking, for instance) is a lot of work AND means tapping other sources which actually DO make me some money. In the great scheme of things, what I could make on my cash is sort of just "noise" within my stash. Not being critical of those who like to maximize their "interest" on cash. It just doesn't seem that important to me. As usual, YMMV.

 

[audreyh1]

Trying to decide if I should break a one year Ally CD at 2%, which doesn't mature until April, and just move it to Vanguard's prime money market. (EWP is two months.)

Did you run a spreadsheet to see if you even break even? I guess you have to guess how much higher the Prime MM might go.

Depositaccounts has an early withdrawal calculator, but you also need to calculate what you would earn by switching (minus the penalty) and compare the two total interest payments over the remainder of CD duration. https://www.depositaccounts.com/tools/ewp-calculator.aspx

I don’t know if I would bother unless there was a wider differential to make up for the penalty.

 

[Koolau]

Did you run a spreadsheet to see if you even break even? I guess you have to guess how much higher the Prime MM might go.

Depositaccounts has an early withdrawal calculator, but you also need to calculate what you would earn by switching (minus the penalty) and compare the two total interest payments over the remainder of CD duration. https://www.depositaccounts.com/tools/ewp-calculator.aspx

I don’t know if I would bother unless there was a wider differential to make up for the penalty.

I guess this a good example of the "games" one has to play to get the best money on cash (now). I realize it's not rocket science and a simple spread sheet will tell you what you need to know. But then, you actually have to do the transfers. I realize that can all be done on the Web, but I don't do that either. So, not critical of those who like the game, but I just don't. Winning the game hardly seems worth the playing to me. Many here probably love the game, so more power (and money!) to them.

 

[sengsational]

If you are extremely reluctant to moving the funds away from your credit union, then inquire about their best CD rates. Certainly you don't need the entire $35k available immediately and picking up the lowly 0.35% yield. Many credit unions have special CD rates.

Thanks for that tip. They do have a 6 month CD at 1.5% APY. Not great, but better than 0.35%. Longer CD's don't work for me because my after tax balance, which is all cash, goes essentially to zero as I approach January; I pull from tIRA in December for the entire following year, limited by PPACA, if that's still a "thing" when December rolls around. An alternative would be to just pop that December money into a high yield savings account at some (new to me) online bank, then ACH money periodically to the CU to pay bills. I'm kind of reluctant to do that since I'm trying to reduce the number of institutions that I deal with. I had eleven, and now I'm down to seven: CU (billpay), Fido, Vanguard, 401k, 401k brokerage, HSA, Bank brick and mortar (safe deposit box & DW's spending account).

 

[jim584672]

I keep $1,000 in physical cash for emergencies.

 

[googily]

Did you run a spreadsheet to see if you even break even? I guess you have to guess how much higher the Prime MM might go.

Depositaccounts has an early withdrawal calculator, but you also need to calculate what you would earn by switching (minus the penalty) and compare the two total interest payments over the remainder of CD duration. https://www.depositaccounts.com/tools/ewp-calculator.aspx

I don’t know if I would bother unless there was a wider differential to make up for the penalty.

Yeah, I did, assuming that Prime gets to 2.15% soon, I'd lose about $50 by breaking it.

Mainly I'm just starting to find out that I really hate selling funds to get cash, thanks to a lifetime of conditioning that invested money is untouchable! So I'm finding myself wanting that CD to be more liquid, even though I don't really need it. But for now I will leave it alone.

 

[Cobra9777]

If your combined cash at Ally and Fidelity is at least 100k, perhaps consider moving all that cash to the Fidelity FZDXX money market account which is close to 2%.
You don't have to keep the 100k in the account, just open it with 100k and then you can reduce it to whatever monies. Then you could move your Ally monies back into the Ally account and effectively have converted your Fidelity rate from 1.6% to 2%.

Or buy the 2% 11 month no penalty CDs at Ally ($25K min for that rate)? That's what I did instead.

Both good suggestions. Thanks.

Most of the cash is at Ally. The part we keep at Fidelity is smaller and fluctuates a lot with spending patterns and quarterly dividends. So the yield difference (FZFXX vs FZDXX) is not very significant, ~$100/yr. Plus, the cash at Fidelity is in a cash management account and FZDXX is not available as a core cash account, while FZFXX is. So I'd be transferring money more frequently.

I think the 2% no-penalty CD at Ally would be the simpler option, with lower minimum, so less hoops to jump through to get the rate. But again, because the yield difference is so much smaller, even though there's more cash sitting there, the impact is still insignificant.