Second Brokerage Account As a Substitute for Savings Account

[Tranquility Base]

I am curious whether anyone uses a second taxable brokerage account as a substitute for, or in addition to, a savings account.

Here’s what I have in mind. Assume I want to keep $100,000 in a savings account for monthly bills, a rainy day, emergencies and lumpy expenses. I don’t think I will need the entire $100,000 to be immediately available as it would be in a savings account, even a savings account at an online bank which is paying a rate of interest more respectable than the interest rate at a big national bricks-and-mortar bank. I would like to keep part of the $100,000, let’s say $30,000, in some very short-term CDs or Treasury Notes (maybe some Treasury Bills) if I can get a slightly higher yield. I’m not going to worry about every last penny. But as time permits, it can be fun to secure a slightly higher yield. I don’t intend to spend a great deal of time chasing a slightly higher yield. Also, I appreciate the difference between funds in a money market account and funds in a CD or US Treasury.

The problem with using the main brokerage account for this hybrid savings account substitute is that the $100,000, presumably held in some combination of money market funds, CDs, US Treasuries, etc., is going to get lost among everything else in the regular brokerage account which includes other money market funds, CDs, US Treasuries of similar or longer terms. There doesn’t seem to be an easy and practical way for me to segregate or separately track the $100,000 that I am treating as my savings account, and I don’t want to create a separate spreadsheet to do so. I’ve seen in promotions that some online banks offer some kind of bucket feature. I have not looked at any of them, but I presume this feature lets me separately track portions of the savings account that I want to allocate for something (perhaps a trip, a new vehicle, child’s wedding). I haven’t seen anything at Schwab or Fidelity that would allow me to create some kind of separate bucket within a taxable brokerage account.

[FONT=&quot]I’m still noodling this idea but it’s the best solution I’ve come up with so far. Has anyone else tried this? Does anyone see anything terribly wrong with this approach or have a better system? Maybe I’d just be spending a lot of time just to earn an additional couple hundred bucks. But I’d probably have some fun doing so.[/FONT]

 

[njhowie]

Sure, there's nothing wrong with having multiple brokerage accounts. Fidelity lets you open as many as you want, just click a couple buttons and it's done.

I have 3 other Fidelity taxable brokerage accounts aside from the primary. Those are for specific goal-oriented purposes.

 

[audreyh1]

Sure why not?

We have three Fidelity taxable brokerage accounts. One is for long term investments holding most of our retirement nest egg, one is for shorter term needs in cash equivalents - savings more or less as most of it is in T-bills and a high yielding Prime MM fund, and one we have more like checking for bill paying is a Fidelity Cash Management account. I fund it useful to segregate accounts by purpose. It helps manage the cash flow among other things.

 

[Tranquility Base]

I am primarily at Schwab. But at Fidelity are you able to transfer funds, or even a specific CD or US Treasury, between taxable brokerage accounts relatively easily? I am assuming it would be much the same at Schwab.

 

[audreyh1]

I am primarily at Schwab. But at Fidelity are you able to transfer funds, or even a specific CD or US Treasury, between taxable brokerage accounts relatively easily? I am assuming it would be much the same at Schwab.

Super super easy at Fidelity. It’s instantaneous for MM funds. You need to call in for Treasuries or CDs. I did transfer a brokered CD between two brokerage accounts and had to call in to do it. A few minutes on the phone. I suspect same for CDs.

There is a transfer in kind option online. I’ve used it to transfer shares of mutual funds between brokerage accounts. Instantaneous.

 

[G-Man]

Sure why not?

We have three Fidelity taxable brokerage accounts. One is for long term investments holding most of our retirement nest egg, one is for shorter term needs in cash equivalents - savings more or less as most of it is in T-bills and a high yielding Prime MM fund, and one we have more like checking for bill paying is a Fidelity Cash Management account. I fund it useful to segregate accounts by purpose. It helps manage the cash flow among other things.

The Fidelity Cash Management Account seems like the perfect solution for this scenario.

 

[audreyh1]

The Fidelity Cash Management Account seems like the perfect solution for this scenario.

Yes it would work as long as someone realizes that it’s a full brokerage account and you also want to move cash to a higher yielding MM Fund than the core account.

Personally we use our CMA for bill paying and travel. Cash moves through fairly quickly. Anything longer than a month or two stays in another brokerage account and is all invested in very short-term fixed income securities including MM funds. That account flows much more slowly.

 

[G-Man]

Yes it would work as long as someone realizes that it’s a full brokerage account and you also want to move cash to a higher yielding MM Fund than the core account.

Personally we use our CMA for bill paying and travel. Cash moves through fairly quickly. Anything longer than a month or two stays in another brokerage account and is all invested in very short-term fixed income securities including MM funds. That account flows much more slowly.

Right now, it is serving as a saving account for me with dollars invested in FZDXX (yielding 5.14% right now). Once I retire, it may be repurposed for something else.

 

[audreyh1]

Yeah, I already had a second brokerage account for that savings purpose.

Then I opened a CMA mostly for the international ATM use benefits. I didn’t want an ATM card tied to either of my larger brokerage accounts. Later I started using it for bill paying as well.

 

[teej1985]

Yes it would work as long as someone realizes that it’s a full brokerage account and you also want to move cash to a higher yielding MM Fund than the core account.

Personally we use our CMA for bill paying and travel. Cash moves through fairly quickly. Anything longer than a month or two stays in another brokerage account and is all invested in very short-term fixed income securities including MM funds. That account flows much more slowly.

I use a Fidelity brokerage account for billpay because the cash sweep is higher yielding.

 

[audreyh1]

I use a Fidelity brokerage account for billpay because the cash sweep is higher yielding.

When I transfer funds into my CMA for bill paying I immediately put it into the higher yielding MM Fund. I only keep about 1 or 2 months worth of cash in that account. So it doesn’t matter much.

 

[qwerty3656]

All my stuff is at Fidelity. I pay bills out of a cash management account that has a 0 balance and automatically draws money from a brokerage account as needed. Most of my "cash" is in my IRAs (Roth and Regular). Every month I automatically transfer x$ from my Roth and y$ from my regular IRA to my brokerage account.

 

[TOOLMAN]

I keep short term money parked in VMFXX now at 5.26%

 

[Route246]

Shouldn't be a problem. I do this with Vanguard. I send money back and forth from Vanguard to my credit union. Takes a few days but no problem if things are planned properly.

 

[ncbill]

I don't do multiple accounts at the same brokerage.

Instead I have accounts at two outside banks (soon to be one) with any emergency funds that I might need to tap in case of access problems at my brokerage.

 

[bloom2708]

We have 3 extra brokerage accounts at Vanguard. One for each of the 3 kids college funds that were not in a 529.

We have a 5th that has some inherited money from my wife's mom. So 5 brokerage accounts inside Vanguard.

Kid 1 has finished college and that account is now $0. I might repurpose or just close it. It doesn't hurt either way.

Divide it up however you like.

 

[MarieIG]

Yes, I do that with Fidelity and Vanguard.

 

[Sojourner]

Shouldn't be a problem. I do this with Vanguard. I send money back and forth from Vanguard to my credit union. Takes a few days but no problem if things are planned properly.

I do the same (i.e., keep the bulk of my cash in VMFXX in my Vanguard account), but when I need to quickly transfer funds to my primary online bank, I find that wiring it out of Vanguard to my bank typically takes just one business day. Quite convenient, and no wire fees.