Holding Cash

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Beach Guy
Posts: 24
Joined: Sat Jun 01, 2019 6:41 am

Holding Cash

Post by Beach Guy »

My son is in his first house. He has two small children and plans to buy a larger house but is happy to wait a year or two. He is saving for the next home and has about $ 150,000 in cash. He doesn't want to invest the money as he will need it in a few years. The money is in his local bank earning basically nothing and actually losing ground to inflation. Do any of the Bogleheads have any personal experience with high yield savings or money market accounts? Is there a "go to" bank or Credit Union? I realize holding cash is a common problem and I hope someone can offer advice.
Dandy
Posts: 6553
Joined: Sun Apr 25, 2010 7:42 pm

Re: Holding Cash

Post by Dandy »

It seems right now that about 1/2 percent in a Savings account or a bit more in a 1 or 2 year CD is about it. Watch out for
anything much higher due to hidden gotchas e.g. some online banks have teaser rates but often have fees or make it difficult to get money out. e.g. accept large incoming assets but limit the size of outgoing transfers.

You might consider a modest allocation to the short term inflation protected security fund since some inflation might be in our short term future.
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anon_investor
Posts: 8400
Joined: Mon Jun 03, 2019 1:43 pm

Re: Holding Cash

Post by anon_investor »

Beach Guy wrote: Sun Aug 01, 2021 7:01 am My son is in his first house. He has two small children and plans to buy a larger house but is happy to wait a year or two. He is saving for the next home and has about $ 150,000 in cash. He doesn't want to invest the money as he will need it in a few years. The money is in his local bank earning basically nothing and actually losing ground to inflation. Do any of the Bogleheads have any personal experience with high yield savings or money market accounts? Is there a "go to" bank or Credit Union? I realize holding cash is a common problem and I hope someone can offer advice.
I have been with Ally Bank for over a decade. They are an online only bank, but FDIC insured. Savings account currently pays 0.5% interest, among the best for FDIC insured. You basically link the savings with your checking and you can transfer the money from Ally to your checking account. There are no gotchas, $0 account minimum.
indexfund56
Posts: 70
Joined: Fri Aug 10, 2018 11:00 am

Re: Holding Cash

Post by indexfund56 »

anon_investor wrote: Sun Aug 01, 2021 7:30 am
Beach Guy wrote: Sun Aug 01, 2021 7:01 am My son is in his first house. He has two small children and plans to buy a larger house but is happy to wait a year or two. He is saving for the next home and has about $ 150,000 in cash. He doesn't want to invest the money as he will need it in a few years. The money is in his local bank earning basically nothing and actually losing ground to inflation. Do any of the Bogleheads have any personal experience with high yield savings or money market accounts? Is there a "go to" bank or Credit Union? I realize holding cash is a common problem and I hope someone can offer advice.
I have been with Ally Bank for over a decade. They are an online only bank, but FDIC insured. Savings account currently pays 0.5% interest, among the best for FDIC insured. You basically link the savings with your checking and you can transfer the money from Ally to your checking account. There are no gotchas, $0 account minimum.
Agree with this. Ally is a very solid option. Been with them for more than eight years and have never had an issue.
abner kravitz
Posts: 624
Joined: Tue May 05, 2015 7:42 am
Location: East Coast

Re: Holding Cash

Post by abner kravitz »

Marcus (Goldman Sachs) has worked for me. I generally use the no penalty CDs - you lose a little on the rate but you can take the $ after 7 days with no penalty (but you have to take it all). They also have competitive savings rates, which of course right now ain’t much. All these savings accounts are losing to inflation.
Last edited by abner kravitz on Sun Aug 01, 2021 7:38 am, edited 1 time in total.
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gatorking
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Joined: Tue Feb 20, 2007 6:15 pm
Location: MA

Re: Holding Cash

Post by gatorking »

Similar thread here: viewtopic.php?t=351158
dbr
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Joined: Sun Mar 04, 2007 9:50 am

Re: Holding Cash

Post by dbr »

There are various options any of which on a given day offer a little more interest than something else. Right now there are no options that offer more than near zero interest and loss to inflation. Sometimes you get a bowl of cherries and sometimes the pits, and there is nothing you can do about it.

I think a person owning a home now and accumulating resources to own a larger home should celebrate rather than worry about interest rates on cash. Keep in mind that when interest rates go up mortgage loan rates also go up. Be careful what you wish for.
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anon_investor
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Joined: Mon Jun 03, 2019 1:43 pm

Re: Holding Cash

Post by anon_investor »

dbr wrote: Sun Aug 01, 2021 7:52 am There are various options any of which on a given day offer a little more interest than something else. Right now there are no options that offer more than near zero interest and loss to inflation. Sometimes you get a bowl of cherries and sometimes the pits, and there is nothing you can do about it.

I think a person owning a home now and accumulating resources to own a larger home should celebrate rather than worry about interest rates on cash. Keep in mind that when interest rates go up mortgage loan rates also go up. Be careful what you wish for.
I would still take the risk free 0.5% interest from FDIC insured online banks like Ally or Marcus.
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