5 Quality Options for Cash Savings – Overview

A few notes to begin:

1. Still need a checking account – somewhere to deposit paychecks and access it whenever you want
2. These are not places to get rich, or drastically grow your money.
3. There are two categories we will discuss: liquid accounts and time requirement accounts. Savings accounts are great places to keep your emergency fund, but only in the liquid options.
4. We also do not encourage 10s of thousands of dollars in these accounts. Once you hit 6-9 months of your expenses saved, start putting your money elsewhere.
   1. Why? Because the interest you are getting off these is much lower than the rate of inflation and you are losing buying power in your money because of inflation. We will talk more about this next week, but essentially, if you keep 10k in your bank account in 2023, by January 2024 your purchasing ability will not be equal to what it was in January of 2024 because of inflation. We will talk about inflation next week.

3 Liquid Accounts

1. Traditional Savings Account
   1. Offered by your local bank
   1. I looked at my local bank, and as of January 2023 the current rate was 0.01%
   1. Safe, secure, and accessible way to access your money
2. Money Market Accounts
   1. A mix between checking accounts and savings accounts because while they give you higher interest rates like a savings account, they provide the option for debit cards and check books like a checking account
   1. You can find them at a lot of banks that offer a HYSA with similar interest rates
3. High Yield Savings Account
   1. It’s the same as a savings account, with higher interest rates.
   1. Generally, you can withdraw up to 6 times without a fee each month
   1. 20-25x the rate of an ordinary savings account.
   1. What to check into?
      1. APY annual percentage yield
      1. Fees – does this account have any fees, what are they are they a dollar amount or a percentage of my funds. (Most have 0 fees)
      1. Is there a minimum deposit (Most have 0 or as high
      1. Is this FDIC insured, meaning are they guaranteed to give me my money up to 250,000. Most of the options you see online will have this.
   1. What options do we recommend?
      1. Ally Bank
      1. Capital One
      1. American Express Personal Savings
      1. Marcus by Goldman Sachs
   1. It may take a day or two for an online bank to transfer your money for you to have access to it. Still need a checking account.
   1. A final note is to remember that these are variable rates and can change with the market

2 savings options with time requirements

• Certificate of Deposit (CD)
  • Can offer the highest interest rate available. I’ve seen upwards of 4.5% as of January 2023
  • Come with a term that you do not have access to your money, generally starting at 1 year minimum.
  • The con with this, is the money is not liquid. This is not a good option for your emergency fund.
  • When is a good time to use this? If you want to put cash in for a larger purchase that you know you are waiting for a year or two like a vacation, new car, down payment on a house. If you know you do not need access to the money but want to get a higher rate of return possible, this is a good option.
• Bonds, bills, and notes
  • You may have heard of I bonds lately. For many people, they seemed to come out of nowhere and offered insanely high interest rates. But because people were unsure what they were, they didn’t benefit from them.
  • We aren’t going to spend a ton of time here explaining this. We plan to go into much more detail on what I bond and T bonds, and Savings bonds/Treasury bonds are in a later episode. For now what you need to know:

What we need to know:

1. These are ways the government makes money. Essentially the government has two streams of income: taxes and loans to individuals and companies. Bonds, bills, and notes provide the government to have income for a set period that they have to pay back after the term is finished.
2. Bonds (10y+), notes (1-10y), bills (>1y) (treasury bonds, not savings bonds (I bonds))
3. Historically very safe because it’s backed by the US government (not usually a high yield of return though)
4. I bond right now are 6.89% for a 6-month period.
5. I bond rates were 0.20 in 2010.
6. Much like CDs, these are good for down-the-road purchases that you don’t need the money right now. Generally,