Ally bank vs. Vanguard money market fund

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shareenmd
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Ally bank vs. Vanguard money market fund

Post by shareenmd »

I currently have 6 months worth of expenses (emergency fund) at Ally bank which currently yields 0.6%. Is there any negative to moving the money to one of the Vanguard money market funds which have yields over 1%? Any suggestions on which "cash" fund is best at Vanguard? It's about $160,000. Thanks!
inverter
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Re: Ally bank vs. Vanguard money market fund

Post by inverter »

With the current interest rates, no. High yield savings accounts are currently ahead of money market.
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anon_investor
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Re: Ally bank vs. Vanguard money market fund

Post by anon_investor »

shareenmd wrote: Sun Oct 11, 2020 6:47 pm I currently have 6 months worth of expenses (emergency fund) at Ally bank which currently yields 0.6%. Is there any negative to moving the money to one of the Vanguard money market funds which have yields over 1%? Any suggestions on which "cash" fund is best at Vanguard? It's about $160,000. Thanks!
1%? More like 0.01%!

Interest rates have fallen so much that Vanguard's money market accounts pay close to 0%, they will not beat Ally's current 0.6% interest.
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shareenmd
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Re: Ally bank vs. Vanguard money market fund

Post by shareenmd »

I went back to look at the article I had read which listed higher yields (1.6%). It was in US News and World Report entitled The best vanguard money market funds. I now see it was from March 4,2020.
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shareenmd
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Re: Ally bank vs. Vanguard money market fund

Post by shareenmd »

To clarify, I'm asking about vanguard money market mutual fund, not a money market account.
tibbitts
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Re: Ally bank vs. Vanguard money market fund

Post by tibbitts »

shareenmd wrote: Sun Oct 11, 2020 8:40 pm To clarify, I'm asking about vanguard money market mutual fund, not a money market account.
There are no money market accounts or funds at Vanguard that currently yield anywhere close to what you're getting at Ally.
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shareenmd
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Re: Ally bank vs. Vanguard money market fund

Post by shareenmd »

Thank you for your responses!
jimkinny
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Re: Ally bank vs. Vanguard money market fund

Post by jimkinny »

plus Vanguard will charge 0.1% or so for a MM fund. Some of Vanguard's MM funds use federal notes, others use corporate notes so the safety of an FDIC insured savings account and a Vanguard MM are not necessarily equivalent.
Rudedog
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Re: Ally bank vs. Vanguard money market fund

Post by Rudedog »

Have a day
Last edited by Rudedog on Tue Nov 10, 2020 5:32 pm, edited 1 time in total.
MikeG62
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Re: Ally bank vs. Vanguard money market fund

Post by MikeG62 »

If it's an emergency fund, consider CD's (with fair EWP's). Yields aren't what they were, but you can do better than 0.60%.
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Blue456
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Re: Ally bank vs. Vanguard money market fund

Post by Blue456 »

shareenmd wrote: Sun Oct 11, 2020 6:47 pm I currently have 6 months worth of expenses (emergency fund) at Ally bank which currently yields 0.6%. Is there any negative to moving the money to one of the Vanguard money market funds which have yields over 1%? Any suggestions on which "cash" fund is best at Vanguard? It's about $160,000. Thanks!
For emergency fund I don’t only think about interest but also accessibility. MM funds might not be accessible during liquidity crisis. Vanguard MM fund might not be accessible when you need it the most.
Personally I am in the process of transferring 80% of my emergency fund into I bonds and leave 20% in chase checking account earning 0% interest. I like I bonds because they are adjusted to inflation and I don’t pay state tax and I defer federal tax. I find the tax deferral to be the biggest advantage since I am more likely to use the fund during unemployment during which I will be in lower tax bracket. The other 20% of my emergency fund is in chase checking account and gives me access to a branch almost anywhere in the country to withdraw whatever I need.
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Re: Ally bank vs. Vanguard money market fund

Post by tibbitts »

jimkinny wrote: Mon Oct 12, 2020 6:14 am plus Vanguard will charge 0.1% or so for a MM fund. Some of Vanguard's MM funds use federal notes, others use corporate notes so the safety of an FDIC insured savings account and a Vanguard MM are not necessarily equivalent.
Well, the "charge" is built into the yield, so it's only necessary to compare yields. If anything I think the safety has become closer now than it had been previously, but you can say that FDIC would still be safer. Relatively both are very low-risk.
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Re: Ally bank vs. Vanguard money market fund

Post by tibbitts »

Blue456 wrote: Mon Oct 12, 2020 9:52 am Personally I am in the process of transferring 80% of my emergency fund into I bonds and leave 20% in chase checking account earning 0% interest. I like I bonds because they are adjusted to inflation and I don’t pay state tax and I defer federal tax. I find the tax deferral to be the biggest advantage since I am more likely to use the fund during unemployment during which I will be in lower tax bracket. The other 20% of my emergency fund is in chase checking account and gives me access to a branch almost anywhere in the country to withdraw whatever I need.
You can't really "transfer into I-bonds" given purchase limits, unless your emergency fund is fairly small. But they do have advantages, as you point out.
Blue456
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Re: Ally bank vs. Vanguard money market fund

Post by Blue456 »

tibbitts wrote: Mon Oct 12, 2020 10:11 am
Blue456 wrote: Mon Oct 12, 2020 9:52 am Personally I am in the process of transferring 80% of my emergency fund into I bonds and leave 20% in chase checking account earning 0% interest. I like I bonds because they are adjusted to inflation and I don’t pay state tax and I defer federal tax. I find the tax deferral to be the biggest advantage since I am more likely to use the fund during unemployment during which I will be in lower tax bracket. The other 20% of my emergency fund is in chase checking account and gives me access to a branch almost anywhere in the country to withdraw whatever I need.
You can't really "transfer into I-bonds" given purchase limits, unless your emergency fund is fairly small. But they do have advantages, as you point out.
You can do it slowly. $15,000 per year per individual or $30,000 per year per married couple.
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anon_investor
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Re: Ally bank vs. Vanguard money market fund

Post by anon_investor »

Blue456 wrote: Mon Oct 12, 2020 11:01 am
tibbitts wrote: Mon Oct 12, 2020 10:11 am
Blue456 wrote: Mon Oct 12, 2020 9:52 am Personally I am in the process of transferring 80% of my emergency fund into I bonds and leave 20% in chase checking account earning 0% interest. I like I bonds because they are adjusted to inflation and I don’t pay state tax and I defer federal tax. I find the tax deferral to be the biggest advantage since I am more likely to use the fund during unemployment during which I will be in lower tax bracket. The other 20% of my emergency fund is in chase checking account and gives me access to a branch almost anywhere in the country to withdraw whatever I need.
You can't really "transfer into I-bonds" given purchase limits, unless your emergency fund is fairly small. But they do have advantages, as you point out.
You can do it slowly. $15,000 per year per individual or $30,000 per year per married couple.
I really like I Bonds for an emergency fund in this interest rate environment. I moved $20k into I Bonds in April, and plan to move another $20k next year from the funds from my no penalty CDs that expire in 2021.
Blue456
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Re: Ally bank vs. Vanguard money market fund

Post by Blue456 »

anon_investor wrote: Mon Oct 12, 2020 11:21 am
Blue456 wrote: Mon Oct 12, 2020 11:01 am
tibbitts wrote: Mon Oct 12, 2020 10:11 am
Blue456 wrote: Mon Oct 12, 2020 9:52 am Personally I am in the process of transferring 80% of my emergency fund into I bonds and leave 20% in chase checking account earning 0% interest. I like I bonds because they are adjusted to inflation and I don’t pay state tax and I defer federal tax. I find the tax deferral to be the biggest advantage since I am more likely to use the fund during unemployment during which I will be in lower tax bracket. The other 20% of my emergency fund is in chase checking account and gives me access to a branch almost anywhere in the country to withdraw whatever I need.
You can't really "transfer into I-bonds" given purchase limits, unless your emergency fund is fairly small. But they do have advantages, as you point out.
You can do it slowly. $15,000 per year per individual or $30,000 per year per married couple.
I really like I Bonds for an emergency fund in this interest rate environment. I moved $20k into I Bonds in April, and plan to move another $20k next year from the funds from my no penalty CDs that expire in 2021.
You and me doing the same thing. I just moved 20k in August and moving another 20k in March.
tibbitts
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Re: Ally bank vs. Vanguard money market fund

Post by tibbitts »

Blue456 wrote: Mon Oct 12, 2020 11:01 am
tibbitts wrote: Mon Oct 12, 2020 10:11 am
Blue456 wrote: Mon Oct 12, 2020 9:52 am Personally I am in the process of transferring 80% of my emergency fund into I bonds and leave 20% in chase checking account earning 0% interest. I like I bonds because they are adjusted to inflation and I don’t pay state tax and I defer federal tax. I find the tax deferral to be the biggest advantage since I am more likely to use the fund during unemployment during which I will be in lower tax bracket. The other 20% of my emergency fund is in chase checking account and gives me access to a branch almost anywhere in the country to withdraw whatever I need.
You can't really "transfer into I-bonds" given purchase limits, unless your emergency fund is fairly small. But they do have advantages, as you point out.
You can do it slowly. $15,000 per year per individual or $30,000 per year per married couple.
That last $5000 per-person carries a significant (to me) annoyance factor though. I can see the first $10k and was considering doing that this spring at .2%, but then I decided I'd probably want the money to pay taxes for Roth conversions anyway.
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Re: Ally bank vs. Vanguard money market fund

Post by ivgrivchuck »

anon_investor wrote: Mon Oct 12, 2020 11:21 am
I really like I Bonds for an emergency fund in this interest rate environment. I moved $20k into I Bonds in April, and plan to move another $20k next year from the funds from my no penalty CDs that expire in 2021.
+1

Doing a similar thing.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
Chuck
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Re: Ally bank vs. Vanguard money market fund

Post by Chuck »

Blue456 wrote: Mon Oct 12, 2020 11:01 am
tibbitts wrote: Mon Oct 12, 2020 10:11 am You can't really "transfer into I-bonds" given purchase limits, unless your emergency fund is fairly small. But they do have advantages, as you point out.
You can do it slowly. $15,000 per year per individual or $30,000 per year per married couple.
I was going to mention I-Bonds as well (currently yielding 1.06% even for 0% issues.)

$10,000 per individual, $5000 per tax return, so your $30,000 couple must be filing separately.
retiredflyboy
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Re: Ally bank vs. Vanguard money market fund

Post by retiredflyboy »

Ally is a great place for EF. Stay put. .6% vs .01%.
Facts are stubborn things. Everything works until it doesn’t.
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tennisplyr
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Re: Ally bank vs. Vanguard money market fund

Post by tennisplyr »

I've been staying with Ally savings for my liquid/emergency cash.
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UpperNwGuy
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Re: Ally bank vs. Vanguard money market fund

Post by UpperNwGuy »

shareenmd wrote: Sun Oct 11, 2020 6:47 pm I currently have 6 months worth of expenses (emergency fund) at Ally bank which currently yields 0.6%. Is there any negative to moving the money to one of the Vanguard money market funds which have yields over 1%? Any suggestions on which "cash" fund is best at Vanguard? It's about $160,000. Thanks!
Stick with Ally high yield savings for your emergency fund. Vanguard has nothing that competes with Ally right now.
fundseeker
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Re: Ally bank vs. Vanguard money market fund

Post by fundseeker »

You could consider a local credit union CD. I found a local one (with restricted membership of course) with a 1.35% one year CD. This website may lead you to a CU that is worthwhile, but be sure to call for the CU's latest rate, which may be lower than the website shows.

https://www.bestcashcow.com/
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