What do I do with extra cash?
Much has changed in the last two years regarding interest rates and how it affects the money in my accounts. We are now in an environment where there is a real benefit to be made if you know where to look, both in a regular savings account or with interest-bearing investments. I want to review some options to get the most out of your hard-earned money.
Where to look
Big Banks
The big banks still aren’t paying you; a JP Morgan Chase savings account is currently yielding .01%. This hasn’t changed in a while. Given the turbulence in the banking industry, Chase doesn’t need to offer a high-interest rate to attract customers. People are happy to be paid nothing for having their money at the largest bank in the US. If you are concerned about the recent volatility of the banking sector, then this is a good option for you.
High Yields Savings Account
The second option, and the one that I generally recommend for emergency savings, is a high-yield savings account. Citi bank offers a 3.85% interest rate on their high-yield savings account. On an emergency fund of 30k, you would be getting paid over $1,000 annually in interest. Not bad at all. Citi is the 4th largest bank in the US and, without a doubt, is systematically important, with 1.93 trillion in assets. All things considered, likely one of the safest places to have money.
Bonds
The third option for excess savings would be to look into US treasuries. US Treasuries are bonds that the treasury issues. They are backed by the full faith of the US government in principle and interest. Not FDIC insured, they do carry interest rate risk but can offer an even better rate of return if you are willing to hold the bonds to maturity. A current 6-month bond yields 4.6% annually. One year yields 4.3%. These rates are as of the writing of this article.
Again, these bonds do carry interest rate risk. Meaning if interest rates increase and you need to sell the bond before it matures, you may be forced to sell at a discount that could eat into your profits or even lose some money. On the other hand, if interest rates go down, you could potentially make money on the sale before the bond's maturity.
Money Market
The Schwab Money Market, which has a current yield of 4.49%, might be something you want to consider putting part of your Emergency Fund in. You likely don’t want to put the entire amount of your emergency fund in there because it takes a few days to get the money out if you need it. So, having part of your emergency fund in high-yield savings at a local bank, as mentioned in option one above, and the remainder in the Schwab Money Market might make a lot of sense for you. Be sure to talk to your Financial Advisor to discuss the specifics of how this would work for you.
Knowing your options
If you are sitting on significant cash reserves and aren’t getting a competitive interest rate, I strongly encourage you to explore some of the available options. This is a relatively new phenomenon as we are exiting a low-interest rate environment that has lasted over a decade.
If you would like to talk to one of our financial advisors and see what options would work best for you, schedule a meeting with one of our ten advisors today!
Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm. The information presented is for educational purposes only and intended for a broad audience. The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.
Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the investment. Whitaker-Myers Wealth Managers has presented information in a fair and balanced manner.
Whitaker-Myers Wealth Managers is not giving tax, legal or accounting advice, consult a professional tax or legal representative if needed.
MY EXTRA CASH AND WHERE IT SHOULD GO
March 22, 2023
Jake Buckwalter
Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm. The information presented is for educational purposes only and intended for a broad audience. The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.
Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the investment. Whitaker-Myers Wealth Managers has presented information in a fair and balanced manner.
Whitaker-Myers Wealth Managers is not giving tax, legal or accounting advice, consult a professional tax or legal representative if needed.
Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers, LTD. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.
