Cash

[OnTheBeach]

Vanguard Short-Term Federal Fund Investor Shares (VSGBX) 2.50%

 

[audreyh1]

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.

You could leave it alone until you really needed it. Personally I keep quite a bit invested in shorter term (3, 6 month) and no-penalty CDs, and savings, and only buy longer CDs if I know I’m not going to touch the money for a while.

A few folks upgraded from the Ally 1.75% no penalty CD to their 2% 12 month CD earlier this year, but I didn’t, because I thought rates might rise quickly and didn’t want to be locked in for 12 months even with only a 60 day penalty. I’ve closed several of my Ally no penalty CDs as other opportunities came along - some 3 and 6 month T-bills, the Andrews 2.75% 9 month special. I did buy a 14 month 2.45% CD a couple of months ago, and now a lot of places are offering that rate or a bit higher for 12 month.

One we get out of this rate rising period (rates stabilize) I’ll see where high yield savings accounts compare to money market funds at the brokerage, and to T-bills. Historically, before 2008, I think you could usually get the best short-term rates in money market mutual funds. We’ll see how this plays out.

 

[audreyh1]

Vanguard Short-Term Federal Fund Investor Shares (VSGBX) 2.50%

This is actually a bond fund with 2.2 year duration. So not exactly a cash/short-term CD equivalent.

 

[pb4uski]

+1

 

[Spock]

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 found this one is a little more clear cut
https://www.depositaccounts.com/tools/break-cd-calculator.aspx

 

[audreyh1]

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.

Also it's very easy to upgrade as rates move up. I was surprised with their recent move so soon. So I suppose in another 3 months there might be yet another move up even before reaching their typical end of year special.

 

[Winemaker]

I have a portion of the portfolio in a stable value fund in my 401k, 4 annual distributions from that under 4% of initial value at retirement 10/14. Those funds are kept in a FDIC MM account, earning squat, but monthly distributions are taken to replace the difference between our net pre retirement income less our net pension income. We give ourselves annual raises for good work performance around the house . We have a few $K in an safe undisclosed location on the property for a SHTF situation. Several years ago after summer storms knocked out the power in Charleston WV for several days, there was no way to get groceries, gas, services, cell service. DMIL and family friend were stranded for days, not good for an 82 yo with a walker, w no AC, power, or a way to get out. We had to take gasoline with us from PA to get us there and back to rescue them.

 

[mickeyd]

Vanguard Short-Term Federal Fund Investor Shares (VSGBX) 2.50%

You need to bear in mind the difference between a bond fund and a MMF.

 

[UnrealizedPotential]

I haven't kept as much cash on hand as in the past. I can always use my credit card if I need to. I still keep money in my regular banking account. There's not that much so I don't mind that it earns nothing. I have been spending more money so I can benefit from my income streams.


There is enough overflow from those streams every month that any emergency will be covered more than likely. It makes holding onto cash not so attractive.

 

[Koolau]

I haven't kept as much cash on hand as in the past. I can always use my credit card if I need to.

<SNIP>

Twice on the Island, we've been unable to use CCs for several hours - from local outages to Island-wide outages. Full disclosure: Not all stores even have the ability to accept cash without their computers. But at least there are SOME places to transact with cash when the power goes out. I'd feel very vulnerable not having at least some cash on hand. Picture a relatively long-term computer/electrical glitch. It wouldn't take much. A solar flare, or heaven forbid, a nuke going off in space. Cash would be king at that point. Yes, it's probably an unlikely scenario. Then again, most of us buy insurance for all kinds of (hopefully rare) possibilities. I have no recommendation, but I keep a few hundred in cash just in case. YMMV

 

[mountainsoft]

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).

We only have three institutions.

Our checking accounts and credit cards are at the local brick and mortar US Bank branch. We started with them and stay partially for the safe deposit box and easy access to accounts for immediate needs. We don't earn any interest on that money, but it's easier to pay off the credit cards regularly and whatnot by having the accounts at one branch.

I moved our savings accounts from US bank to discover.com earlier this year. It's currently earning 1.75%, light years ahead of the .01% or whatever ridiculous rate we were getting at US bank. I also put 30K in a 12 month Discover CD. It pays 2% interest, but it's money we'll need to care for my mom in a few years so I wanted to make sure we didn't accidentally dip into that money.

My traditional IRA is with Vanguard.

I've had no trouble transferring money back and forth between institutions (well, I haven't withdrawn any money from my IRA yet). It does take a few days for the transfer to complete, but that's usually not a problem.

 

[Scratchy]

Cash in my Schwab brokerage account sweeps automatically into SWSXX which is currently earning 1.49%. The brokerage account is automatically tapped to cover any checking account overdrawal so I can keep a minimum balance in my Schwab investor checking account, which earns minimal interest. I'm very happy with that.

 

[morriss003]

Where do you stash cash? Well not exactly cash money in greenbacks, but easy to access money that I can turn into cash.

I have a few hundred in a local credit union, and somewhere between 10-20 thousand in a vanguard money market account. I auto transfer out of that VG account for reoccurring bills. And I use it as a slush fund if I ever need it. Maybe once every couple years i need it for that. But I have a lot more than I normally need in that account, especially since it does pay much in interest.

Is there a better way? Should I just lower my mm account totals?

Given the international situation, it is much safer to leave your money where it is.

 

[VanWinkle]

Given the international situation, it is much safer to leave your money where it is.

Or buy International stock yesterday like I did.....

Buy it while it is on sale. Not a major purchase, but a little.

VW

 

[kaneohe]

Cash in my Schwab brokerage account sweeps automatically into SWSXX which is currently earning 1.49%. ................................

How do you rate that? I was under the impression that the only sweep available was to a bank acct earning 0.2+ % . Also told that higher yielding funds are available but not as sweep funds and that you manually have to move them.

 

[TEO]

I use an Ally Bank savings account, currently paying 1.8%
https://www.ally.com/bank/online-savings-account/

+1

 

[nvgs123]

Citizens Access

I currently use Citizens Access online accounts. Savings is 2%APY and I have laddered CDs over 5 years at competitive rates (2.5-3.1%).

 

[audreyh1]

How do you rate that? I was under the impression that the only sweep available was to a bank acct earning 0.2+ % . Also told that higher yielding funds are available but not as sweep funds and that you manually have to move them.

I think some folks were grandfathered? It’s not an option for me.

 

[Bruno]

I keep my extra in a online Discover savings account paying 1.75%. FDIC and easy to transfer back to my checking account if needed.

https://www.discover.com/online-banking/savings-account/

 

[dixter]

Here is a different approach... Bank Direct ( bankdirect.com ) gives you 1 frequent mile for each $... so I put $50K in an account and they give me 60K frequent miles per year and the wife and I use those miles for trips to the caribbean islands for free...we try to go at least once a quarter to some island...

for our checking account we have www.treasurydirect.gov purchase t-bills directly with 30 day maturity that is staggered month to month... that way most of our money is always available if we need it but the tbills are paying the most interest and you can't loose your money with this setup... once you get it setup its automatic...

 

[sengsational]

Did opening a Discover Savings include a hard pull from the credit files? It's a bit of a pain to unlock them for stuff like this.

 

[Tracer]

I like to keep a healthy cash stash for emergencies and near future large purchases.

All America Bank in Mustang, Ok (see link below) seems to take the lead in high yield accounts over just about everyone else. They are currently paying 2% APY. I have a Bank of America account. If I do an EFT through them by 8 PM, I can have that cash available at my local branch by the next morning.

https://www.allamerica.bank/personal/banking/checking/mega-money-market-checking

 

[kitesurfer2]

currently sitting with 20k in cash in the credit union. usually keep a few $100 bills folded up in my wallet for punch out money as well as a couple hundred in $20's to use. I also keep some cash in my sock drawer. but I NEVER spend cash all buys are CC and paid monthly. some time I clean out checking/savings and deposit into my USAA stock account.