According, the average money market account in a bank is giving 0.11% per year, which represents an increase during the last year. Contract it with the many mutual funds in the money market and bank current accounts that still yield 0.01% or up to 0%.Two strategies I have used for over a decade are to find the money market accounts and savings accounts with the highest yield and the deposit certificates with the highest work that also have low penalties for early withdrawal.Investment in cash: Where to put the cash 2023?
Fear of commitment
A money market or savings account could be perfect if you want to avoid tying up cash. When this article was written, the accounts that appeared on Bankrate.com and DepositAccounts.com gave up to 1.2% per year. Since time is important to me, I usually keep the money in banks with a history of paying higher rates instead of transferring it to another institution every time a promotional rate is finished. Online savings accounts at Synchrony Bank and Ally Bank, which respectively give 1.05% and 1%, are some of those that offer higher rates.
Although these rates may seem very low, if you currently do not earn anything on cash, the account at Synchrony Bank would give you an additional $105 for every $10,000 deposited, or $1,050 for every $100,000. It doesn’t pay you badly, let’s say, for half an hour of your time.Investment in cash: Where to put the cash 2023?
Earn more with a small commitment.
Deposit certificates pay higher rates than money market accounts, but I wouldn’t say I like to tie up money either, and doing it for five years makes me a little nervous. However, buying a certain type of deposit certificate can help you reform your thinking.
For example, a five-year deposit certificate at Sallie Mae Bank gives 2.1% and has a 180-day early withdrawal penalty. (That means you would lose 180 days of interest if you retracted it early.) But I consider it a one-year deposit certificate that gives 1.05% (the amount I would earn after paying the penalty) and includes the option of leaving the money invested, yielding 2.1% per year for up to four additional years.
You can find some of the highest rates at Bankrate.com or DepositAccounts.com, and the DepositAccounts calculator can help you calculate profits after paying any early withdrawal penalty.
Do it all.
My favourite feature on the DepositAccounts website may be the “Where to Safely Grow Your Cash” calculator. With a deposit of $10,000, he showed me that I could earn the following in five years:
- Savings account: $599 if the rates remain the same.
- Five-year deposit certificate: $1,270
- willing to do everything: $2,639.
The last of the three options requires the enormous effort of opening several checking accounts that offer rewards and making the minimum number of charges with a debit card each month. I wouldn’t choose that option because there are other things I prefer to do with the time it takes. However, it may be right for you.
Another option to place cash is in short-term bond funds. Vanguard’s Short-Term Treasury Fund (VFISX) yields 0.68%, but it would lose almost 2.3% if rates rose 1 percentage point. That’s because bond prices and the prices of funds that invest in bonds decrease when interest rates increase. Another alternative, usually better than deposit certificates, is to settle your mortgage as long as you have enough additional money to do so. This can be as a general rule as if you were earning between 3% and 6%, depending on your mortgage rate.Investment in cash: Where to put the cash 2023?
Don’t let the current low-interest rates discourage you. Fight inertia and don’t let others benefit by paying you a pittance. Spend an hour or two using some of the tools mentioned above, and put the cash in a place where it gives you a good return. Take time to read the fine print in the disclosures of money market accounts and certificates of deposit, and make sure that the institution does not reserve the right to change the conditions after an account is opened retroactively.Investment in cash: Where to put the cash 2023?