Tax-exempt money market a losing place for emergency fund?

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Shireman28
Posts: 189
Joined: Fri Nov 02, 2007 8:49 am

Tax-exempt money market a losing place for emergency fund?

Post by Shireman28 » Tue Apr 05, 2011 8:40 am

I just logged into my account for the first time in a while, and checked the yield on Vanguard's Tax Exempt money market fund, where I stash my emergency cash.

It is 0.12%

The expense ratio is 0.17%.

I suppose this means I am paying Vanguard now to hold my money?

(I was making something like 4% during the financial meltdown, and expected at least .75% or something)

Where are the rest of you holding your emergency cash at this point? CDs? Short-term bond funds? Super interest bearing checking accounts?

Thanks for any help/ideas.

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Post by dbr » Tue Apr 05, 2011 8:46 am

The 0.12% is after the ER.

Yes, lots and lots of people have posted here about opportunities to hold cash in CD's and high yield savings accounts.

There is also a plan by which one can hold stable assets in tax deferred accounts and the emergency fund in equities in taxable. If the equities have to be liquidated in an emergency, they can be re-purchased from stable funds in tax deferred. I think there is a Wiki posting on that.

Sidney
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Joined: Thu Mar 08, 2007 6:06 pm

Post by Sidney » Tue Apr 05, 2011 9:21 am

We hold only enough cash to pay the next credit card bill. Cash has near zero expected return. Our equity holdings are less than our taxable accounts so we can hold tax-exempt bonds in taxable - that is as close to "emergency" funds as it gets.
I always wanted to be a procrastinator.

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brisni
Posts: 110
Joined: Mon Mar 12, 2007 12:45 pm
Location: Austin, TX

Post by brisni » Tue Apr 05, 2011 10:54 am

Rates are low everywhere, and currently the best you can do with an online saving account is little more than 1%. You will pay tax on that but at least it is better than Vanguards MM funds. Check out www.depositaccounts.com

- Brian

staythecourse
Posts: 6016
Joined: Mon Jan 03, 2011 9:40 am

Post by staythecourse » Tue Apr 05, 2011 11:04 am

Consider ally 5yr. cd with only a 60 day penalty.

As long as you don't need to break the cd for 2-3 months and don't mind waiting the 2-3 days for any money to be transferred to your bank if you break the CD.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

campy2010
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Joined: Sun Nov 28, 2010 5:01 pm

Post by campy2010 » Tue Apr 05, 2011 11:19 am

brisni wrote:Rates are low everywhere, and currently the best you can do with an online saving account is little more than 1%. You will pay tax on that but at least it is better than Vanguards MM funds. Check out www.depositaccounts.com

- Brian
I use a local credit union that has a 3.25% rewards checking account. Perhaps, you should ask the people who live in your state what the best bank is for high rewards checking. Some of these regional banks don't make it onto the national websites like bankrate.com or depositaccounts.com.

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