Vanguard Money Market vs. Savings Accounts

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
User avatar
abuss368
Posts: 12460
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Vanguard Money Market vs. Savings Accounts

Post by abuss368 » Thu Jul 27, 2017 9:50 pm

Bogleheads -

Now that interest rates for money market accounts, and Vanguard in particular, are increasing, I have been thinking through the possibility of closing our low yielding savings account at the Bank and opening a Prime Money Market fund with Vanguard.

I check the yield of the Vanguard Prime Money Market fund online: Yield - 1.02. The June 2017 payout was 0.00084.

Example

Bank - 0.03% - Savings - $100,000 * 0.03 = $30 or $2.50 a month

Vanguard - Prime Money Market

Yield - 1.02% (0.00084 payout) - $100,000 * 0.00084 = $84 * 12 months = $1,008

The example is an approximation.

What are the advantages and disadvantages to maintaining a low yield account with the local bank? We are presently with Wells Fargo.


Thoughts
1) Cash is consolidated at Vanguard or Wells Fargo.
2) Yield is higher at Vanguard.
3) Bank is FDIC insured.
4) Vanguard - Money market mutual fund - unsure of account protection.
5) Cash would keep up with inflation better with Vanguard (while still below inflation, better than bank).
6) Cash could be transferred to local bank in a day or two electronically.
7) One less account statement each month.
8) Cash is king. Having it accessible at bank may provide better peace of mind.

** Perhaps I am overthinking, but when I see an almost $1,000 difference in interest I pause. If we transitioned to a money market fund, would this involve opening a brokerage account with vanguard? Are mutual fund accounts available any longer?

Any thoughts or perspective is much appreciated.

Best.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

ny_knicks
Posts: 193
Joined: Wed Jan 04, 2017 11:20 pm

Re: Vanguard Money Market vs. Savings Accounts

Post by ny_knicks » Thu Jul 27, 2017 10:06 pm

There are plenty of FDIC insured banks w/ savings accounts that have APY > Vanguards Prime Money Market Fund.

Goldman Sachs is one example paying 1.2% APY. Seems like opening a new savings account with a higher APY checks off a lot of your list.

User avatar
abuss368
Posts: 12460
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Money Market vs. Savings Accounts

Post by abuss368 » Thu Jul 27, 2017 10:19 pm

ny_knicks wrote:There are plenty of FDIC insured banks w/ savings accounts that have APY > Vanguards Prime Money Market Fund.

Goldman Sachs is one example paying 1.2% APY. Seems like opening a new savings account with a higher APY checks off a lot of your list.
Good points and I liked the Soldman Sachs note. I thought one needed to have a 8 digit account minimum to open!
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

ny_knicks
Posts: 193
Joined: Wed Jan 04, 2017 11:20 pm

Re: Vanguard Money Market vs. Savings Accounts

Post by ny_knicks » Thu Jul 27, 2017 10:24 pm

abuss368 wrote:
ny_knicks wrote:There are plenty of FDIC insured banks w/ savings accounts that have APY > Vanguards Prime Money Market Fund.

Goldman Sachs is one example paying 1.2% APY. Seems like opening a new savings account with a higher APY checks off a lot of your list.
Good points and I liked the Soldman Sachs note. I thought one needed to have a 8 digit account minimum to open!
They bought GE Capital Bank I believe a year ago and basically just rebranded it...based on the fact that they are at the top or near the top for APY I am guessing they are aggressively trying to grow their demand deposits.

No 8 digit account here! But I am a "client" of Goldman lol

Momus
Posts: 294
Joined: Tue Feb 21, 2012 9:23 pm

Re: Vanguard Money Market vs. Savings Accounts

Post by Momus » Thu Jul 27, 2017 10:58 pm

Plenty of high yield savings account around, to name a new: Ally bank, Capital one, Goldman Sach, CIT bank, discover, synchrony, Barclay's. All of them offer 1.1% and above.

User avatar
abuss368
Posts: 12460
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Money Market vs. Savings Accounts

Post by abuss368 » Thu Jul 27, 2017 11:32 pm

I am curious if many Bogleheads have a savings account?
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

mega317
Posts: 2247
Joined: Tue Apr 19, 2016 10:55 am

Re: Vanguard Money Market vs. Savings Accounts

Post by mega317 » Thu Jul 27, 2017 11:44 pm

I would guess that "many" Bogleheads have their emergency funds in (high-yield) savings accounts.

I like maintaining an account at a brick and mortar bank in case I need something that an online bank can't do--most recently a signature guarantee for Treasury Direct, and medallion before that. I've also been told by Ally that I can't deposit a check made out to my infant, but Chase will do that for me.

Momus
Posts: 294
Joined: Tue Feb 21, 2012 9:23 pm

Re: Vanguard Money Market vs. Savings Accounts

Post by Momus » Fri Jul 28, 2017 12:21 am

mega317 wrote:I would guess that "many" Bogleheads have their emergency funds in (high-yield) savings accounts.

I like maintaining an account at a brick and mortar bank in case I need something that an online bank can't do--most recently a signature guarantee for Treasury Direct, and medallion before that. I've also been told by Ally that I can't deposit a check made out to my infant, but Chase will do that for me.
I have both, I maintain minimum $1500 balance at bank of America for free notary services, very rare cashier check purposes, and international wire capability. The rest of cash is at Ally bank. This gives me the best of both worlds.

Longtermgrowth
Posts: 535
Joined: Thu Nov 26, 2015 1:59 pm

Re: Vanguard Money Market vs. Savings Accounts

Post by Longtermgrowth » Fri Jul 28, 2017 12:48 am

abuss368 wrote:I am curious if many Bogleheads have a savings account?
Since I don't have access to the Vanguard Money Market, I keep my liquid cash in an online "high yield" savings account. It's earning a little over 1%. I initially moved it to that savings account over the others because of a decent bonus at the time, with one of the highest APY's. You may want to check around to see where the best interest rate and bonus transfer is currently if going with one of those. I would be pretty happy and comfortable with the Vanguard Money Market now that its interest rate is competitive with the FDIC insured savings/money market accounts.

You could also check depositaccounts.com for deals and highest interest rate. I think Ally still has a 1.5% no penalty 11month CD with a 25k minimum as well. It all comes down to how much you value simplicity over earning a little more for the effort.

*3!4!/5!
Posts: 1256
Joined: Fri Sep 02, 2016 1:47 pm

Re: Vanguard Money Market vs. Savings Accounts

Post by *3!4!/5! » Fri Jul 28, 2017 3:38 am

abuss368 wrote:I am curious if many Bogleheads have a savings account?
Is that a serious question? I would think the overwhelming majority fled from money market funds, to go to online savings accounts, several years ago, while the latter had a full 1% yield advantage, and are only now starting to drift back as yields are starting to equalize somewhat.
viewtopic.php?f=10&t=221230

User avatar
abuss368
Posts: 12460
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Money Market vs. Savings Accounts

Post by abuss368 » Fri Jul 28, 2017 6:36 am

*3!4!/5! wrote:
abuss368 wrote:I am curious if many Bogleheads have a savings account?
Is that a serious question? I would think the overwhelming majority fled from money market funds, to go to online savings accounts, several years ago, while the latter had a full 1% yield advantage, and are only now starting to drift back as yields are starting to equalize somewhat.
viewtopic.php?f=10&t=221230
Thank you for your post and the link to the additional thread.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

User avatar
Toons
Posts: 12790
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: Vanguard Money Market vs. Savings Accounts

Post by Toons » Fri Jul 28, 2017 8:20 am

I use Cap360 Money Market.
1.10 on balances over 10k :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

User avatar
midareff
Posts: 5610
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: Vanguard Money Market vs. Savings Accounts

Post by midareff » Fri Jul 28, 2017 8:51 am

abuss368 wrote:I am curious if many Bogleheads have a savings account?

I have a checking and two savings accounts at Ally Bank. I use one of the savings accounts to escrow IRS Estimated Quarterly Payments, Property Taxes and car and condo insurance. The other is my travel/slush fund. Both savings accounts pay 1.15% and are insured.

At the moment they also have an 11 month 1.5% CD available which does not have a break penalty.

User avatar
goingup
Posts: 3122
Joined: Tue Jan 26, 2010 1:02 pm

Re: Vanguard Money Market vs. Savings Accounts

Post by goingup » Fri Jul 28, 2017 9:55 am

abuss368:
Do you already have a taxable mutual fund account with Vanguard on the non-upgraded platform? If so, I'm sure your bank account is linked. It's as easy as going into the taxable account heading and selecting "buy and sell". Select "buy". Choose "add another account". Then select Prime Money Market fund and the $$ you wish to purchase. Vanguard will pull from your bank to purchase shares of the MM account. Very easy.

We've held Vanguard MM funds for many years. It's convenient and now the interest rate is competitive. I'm not worried about Vanguard "breaking the buck".

If you don't already have taxable mutual funds with Vanguard, I suspect you may have to open a brokerage account to use the Prime Money Market fund.

User avatar
flamesabers
Posts: 1721
Joined: Fri Mar 03, 2017 12:05 pm
Location: Rochester, MN

Re: Vanguard Money Market vs. Savings Accounts

Post by flamesabers » Fri Jul 28, 2017 9:59 am

Unless you're saving for a major purchase or you live in a very HCOL area, I think $100k in savings is a bit excessive. If you're permanently going to keep that kind of money in cash, I think it makes sense to keep it in the savings/money market account that offers the best APY. On the other hand, when you have a relatively much smaller amount of cash, (say $10-15k) the need to put it in the highest APY account possible isn't as compelling.

I like keeping my "savings" in a Vanguard money market for convenience, but I don't have $100k sitting in this account.

User avatar
DaftInvestor
Posts: 3934
Joined: Wed Feb 19, 2014 10:11 am

Re: Vanguard Money Market vs. Savings Accounts

Post by DaftInvestor » Fri Jul 28, 2017 10:04 am

abuss368 wrote:I am curious if many Bogleheads have a savings account?
Based upon all the threads that come up regarding Ally, Syncrhony, GSbank, etc. - I'd say that the majority do.
I use mine (1.2% at gsbank) for emergencies and larger purchases we are holding cash for.

crg11
Posts: 411
Joined: Sat Jan 04, 2014 8:16 am

Re: Vanguard Money Market vs. Savings Accounts

Post by crg11 » Fri Jul 28, 2017 10:22 am

I recently moved my emergency fund from an online savings account into a Vanguard Prime Money Market fund. Interest rates are basically the same, so no change there.

Main reason is to consolidate the # of accounts/companies I have a financial relationship with (now down to a credit card company, a local credit union, and Vanguard).

I'm not worried about lack of FDIC insurance...money market funds are well diversified and I will take my chances that Vanguard will be around.

jpdion
Posts: 85
Joined: Thu Feb 13, 2014 12:52 pm

Re: Vanguard Money Market vs. Savings Accounts

Post by jpdion » Fri Jul 28, 2017 10:58 am

I keep 12 to 18 months of funds in Vanguard Prime Money Market Account (TIRA), peeling off some gains in Total Stock Market and shifting them to MM as they occur. I also keep a few extra $K in a brick and mortar checking account - which also give me access to helpful convenience services. (But, I do ruminate about the need for the money market account.)

Cop51
Posts: 58
Joined: Sun Jul 09, 2017 12:42 am
Location: NJ

Re: Vanguard Money Market vs. Savings Accounts

Post by Cop51 » Fri Jul 28, 2017 11:04 am

I have used Capital one 360 Saving and Money Market account for years. Way back when the savings rate was 3.9%!. Money Market now is 1.10% on balance over 10k. I don't chase .1 or .2% on money market accounts. Pick one and stick with it.

User avatar
Abe
Posts: 1763
Joined: Fri Sep 18, 2009 5:24 pm
Location: Earth in the Milky Way Galaxy

Re: Vanguard Money Market vs. Savings Accounts

Post by Abe » Fri Jul 28, 2017 11:24 am

The SEC yield for my Vanguard Prime Money Market Fund (VMMXX) is 1.10%.
Slow and steady wins the race.

User avatar
abuss368
Posts: 12460
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Money Market vs. Savings Accounts

Post by abuss368 » Fri Jul 28, 2017 7:46 pm

I think I may be crazy for holding a savings account at Wells Fargo yielding 0.03%! If cash is a part and will continue to be a growing part of our financial plan, I suspect the Vanguard Prime Money Market may be a much better strategy.

Inflation is eroding the value of our savings. The money market at least provides a little more than half of current inflation!
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

User avatar
abuss368
Posts: 12460
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Money Market vs. Savings Accounts

Post by abuss368 » Sat Jul 29, 2017 7:46 pm

An excellent thread with great feedback!
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

patrick
Posts: 1567
Joined: Fri Sep 04, 2009 3:39 am
Location: Mega-City One

Re: Vanguard Money Market vs. Savings Accounts

Post by patrick » Sat Jul 29, 2017 7:52 pm

I still don't see a good reason to prefer 1.1% on Vanguard Money Market over the 1.5% I get on my Redneck Bank deposit account. Vanguard not only lacks FDIC insurance, but far more importantly they lack a debit card with a picture of a horse on it.

User avatar
Uncle Pennybags
Posts: 1836
Joined: Tue Oct 28, 2014 2:05 am

Re: Vanguard Money Market vs. Savings Accounts

Post by Uncle Pennybags » Sat Jul 29, 2017 8:26 pm

abuss368 wrote:I am curious if many Bogleheads have a savings account?
I do, 3.4% of my liquid portfolio. Maybe time to move some to my "settlement fund". I do want to keep the local credit union relationship.

As for "breaking the buck", last time that happned the fed stepped in and insured MM acounts. Too big to fail.

User avatar
abuss368
Posts: 12460
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Money Market vs. Savings Accounts

Post by abuss368 » Mon Jul 31, 2017 8:57 pm

Excellent feedback!
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

pasadena
Posts: 173
Joined: Sat Jul 02, 2016 1:23 am

Re: Vanguard Money Market vs. Savings Accounts

Post by pasadena » Mon Jul 31, 2017 9:39 pm

I gather that you're not planning on using all that cash any time soon. If that's the case, and if I were you, I would open a bunch of no-penalty CD's at Ally, with $25k each at 1.5% APY.

User avatar
MrDogg
Posts: 108
Joined: Sat Feb 06, 2016 3:21 pm
Location: South Florida

Re: Vanguard Money Market vs. Savings Accounts

Post by MrDogg » Tue Aug 01, 2017 2:29 pm

My "pseudo savings account" where I park most of my cash is Vanguard's short term corporate bond fund VSCSX with a YTD yield of 2.3%. I also have small low yield savings accounts online at 1.1% and at my local credit union at .5% that I can draw on in the event the bond fund is down at the time I need some quick cash.

I am open and would welcome anyone poking holes in this tactic.

informal guide
Posts: 176
Joined: Mon Aug 29, 2016 10:26 am

Re: Vanguard Money Market vs. Savings Accounts

Post by informal guide » Tue Aug 01, 2017 2:55 pm

Like MrDogg, I use a short term bond fund - -in my instance, the Vanguard Short Term Investment Grade Admiral fund. SEC yield (today, 2.02%) is consistently higher than money funds (and bank money market deposit accounts). However there are two tradeoffs:

1) there is modest principal volatility and no FDIC insurance. In the last 12 months the price per share has ranges from $10.60 to $10.80 per share. Here are the annualized quarterly total return results in the 2008-2009 meltdown: Q3 2008: - 3.39%, Q4 2008 - 2.34% , Q1 2009 + 2.03%. Q2 2009 +6.05%. Here is the applicable fund page on Vanguard.com: https://personal.vanguard.com/us/funds/ ... ab=1&tab=1

2) each sale (in a taxable account) is a tax-reportable transaction. adding some complexity at tax time.

remomnyc
Posts: 508
Joined: Mon Jan 04, 2016 4:27 pm

Re: Vanguard Money Market vs. Savings Accounts

Post by remomnyc » Tue Aug 01, 2017 3:09 pm

We keep our savings (for lumpy expenses) at GS Bank 1.2%. We keep our short term cash needs (house downpayment) in Ally 11-mo no penalty cds (1.4%) and 5-yr Ally cds (2.25%) with a 5-mo penalty for early withdrawal.

FootballFan5548
Posts: 137
Joined: Mon May 01, 2017 2:20 pm

Re: Vanguard Money Market vs. Savings Accounts

Post by FootballFan5548 » Tue Aug 01, 2017 3:19 pm

Toons wrote:I use Cap360 Money Market.
1.10 on balances over 10k :happy
I use the same thing and have roughly $100k parked here. If I don't have a short term need for this money, but want to keep it in cash for some other reasons, is there any reason to use a CD, or should I just keep it with Cap360? At a 1.10% annual rate, compared to some CD's which are equal or less, I don't see why I'd need a CD. Am I missing anything?

User avatar
Kenkat
Posts: 4128
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: Vanguard Money Market vs. Savings Accounts

Post by Kenkat » Tue Aug 01, 2017 3:32 pm

patrick wrote:I still don't see a good reason to prefer 1.1% on Vanguard Money Market over the 1.5% I get on my Redneck Bank deposit account. Vanguard not only lacks FDIC insurance, but far more importantly they lack a debit card with a picture of a horse on it.
That seems like a really good deal but I did see this on their website:

Amounts over $35,000 earn .50% APY*

The Wizard
Posts: 11903
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Vanguard Money Market vs. Savings Accounts

Post by The Wizard » Tue Aug 01, 2017 4:11 pm

abuss368 wrote:I am curious if many Bogleheads have a savings account?
No, I no longer do.
I made a executive decision a while back to move excess from my checking account into my taxable investment account henceforth, just holding VTSAX for now.
Main reason is that savings interest is taxed at 28% federal for me whereas dividends are taxed at 15%.
The volatility of stocks vs FDIC insured totally does not bother me...
Last edited by The Wizard on Tue Aug 01, 2017 4:13 pm, edited 1 time in total.
Attempted new signature...

User avatar
Toons
Posts: 12790
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: Vanguard Money Market vs. Savings Accounts

Post by Toons » Tue Aug 01, 2017 4:13 pm

FootballFan5548 wrote:
Toons wrote:I use Cap360 Money Market.
1.10 on balances over 10k :happy
I use the same thing and have roughly $100k parked here. If I don't have a short term need for this money, but want to keep it in cash for some other reasons, is there any reason to use a CD, or should I just keep it with Cap360? At a 1.10% annual rate, compared to some CD's which are equal or less, I don't see why I'd need a CD. Am I missing anything?
I think like you .
I keep a substantial amount in Cap Money Market also.
Convienent if I need it.
Transfer to Cap360checking.
CDs a I have never purchased.
Not intereseted in chasing yield.
:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

User avatar
abuss368
Posts: 12460
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Money Market vs. Savings Accounts

Post by abuss368 » Mon Aug 07, 2017 9:54 pm

Bogleheads -

To circle back, we have moved some funds to the Vanguard Prime Money Market Fund. The yield is approximately 1.10%. We will begin to wind down our Savings account that is presently yielding 0.03%.

Best.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

vtMaps
Posts: 367
Joined: Tue Oct 14, 2008 12:05 pm
Location: central Vermont

Re: Vanguard Money Market vs. Savings Accounts

Post by vtMaps » Tue Aug 08, 2017 2:40 am

abuss368 wrote:Cash would keep up with inflation better with Vanguard (while still below inflation, better than bank)
abuss368 wrote:Inflation is eroding the value of our savings. The money market at least provides a little more than half of current inflation!
Have you considered transitioning to ibonds? It will take a few years to move $100k, but they are very liquid after a year and they keep up with inflation.

--vtMaps
The optimist proclaims that we live in the best of all possible worlds; and the pessimist fears this is true. --James Branch Cabell

User avatar
Artsdoctor
Posts: 3362
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

Re: Vanguard Money Market vs. Savings Accounts

Post by Artsdoctor » Tue Aug 08, 2017 12:01 pm

Cash. You can spend a considerable amount of time chasing yield. If you had unlimited time and really wanted to eke out a few dollars in interest, I'd use bankrate.com to at least start.

Two things that have helped me decide where to put my cash.

First, you really have to figure out your after-tax return. The only way I've found to do that is to use last year's federal and state returns on TurboTax, and put in what an extra $1,000 in interest would cost me in taxes. There are too many complexities, at least for me, to figure it out any other way. With money market funds increasing their yield, you might come out ahead using a tax-exempt money market when all is said and done, although a portion of that income might be subject to the AMT (if that would apply to you).

Second, you need to think about convenience and how much convenience means to you (i.e., how much it costs you). You can literally have several online savings accounts sprinkled around town (or the country), and you can make a few more dollars by doing so. If you're young and healthy, go for it. But there is something to be said for having your cash easily accessible by someone else if you're not able to get to it. My mom searches out the best yields on CDs and it's more or less a hobby; this generally goes well, but I can tell you that when my dad died, it took a tremendous amount of work to update accounts and re-title them. Some were in town and some were online; they all required death certificates, new signatures, and that was with a woman who was in charge of everything with books to prove it--if my mom would have died first, it would have been much, much harder. And for what? A few hundred dollars a year?

If you're going to run around and have savings accounts and/or CDs squirreled away around the country, at least make sure that everything is recorded in one place, that passwords are readily accessible, and that a paper trail is easy to understand for others who may need access. And whatever you do, make sure that you understand what that particular institution requires for someone else to have access to the account. You'd be surprised at how difficult it is to get access to a simple checking account if the Payable On Death paperwork hasn't been completed properly (or even outdated).

User avatar
abuss368
Posts: 12460
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Money Market vs. Savings Accounts

Post by abuss368 » Tue Aug 08, 2017 12:08 pm

vtMaps wrote:
abuss368 wrote:Cash would keep up with inflation better with Vanguard (while still below inflation, better than bank)
abuss368 wrote:Inflation is eroding the value of our savings. The money market at least provides a little more than half of current inflation!
Have you considered transitioning to ibonds? It will take a few years to move $100k, but they are very liquid after a year and they keep up with inflation.

--vtMaps
I passed but thank you.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

User avatar
iceport
Posts: 3761
Joined: Sat Apr 07, 2007 4:29 pm

Re: Vanguard Money Market vs. Savings Accounts

Post by iceport » Tue Aug 08, 2017 1:29 pm

abuss368 wrote:I am curious if many Bogleheads have a savings account?
I do, but I'm considering transferring most of it to Vanguard. And my circumstances surely differ from yours.

While working, I maintained (and grew) a sinking fund in a decent-yielding savings account at my credit union. The account served as a fund reservoir for emergencies, car replacement, and home maintenance. It currently yields 0.75%, and there's about $60k in there. Much of the sinking fund is probably needed for a lot of deferred home maintenance ( :oops: ), but the costs won't be incurred all at once.

So now I'm recently retired, and I'm debating a couple of things. First, as many on the forum like to point out — correctly — maintaining a separate emergency fund with a decent sized retirement portfolio is really just unnecessary mental accounting. While accumulating, I consciously opted to engage in that mental accounting. Building a (mental) firewall around my retirement savings was important for me, and it worked. Once funds were deposited into accounts dedicated for retirement, they never came out. Ever. But now, I might just fold the sinking fund into my taxable account at Vanguard, and finally manage it as part of the larger portfolio.

The second consideration is, if I do eliminate the sinking fund, how should it be invested? The default might well be a money market fund. Yes, the yield is getting better, and the liquidity is worth something. But the yield isn't that much better than the 0.75% I'm getting in the credit union savings account. So I'm tempted to put it in a short term bond fund yielding in the neighborhood of 2%, just to make it worth the move.

The two funds I'm considering are Vanguard Short-Term Corporate Bond Index Fund (VSCSX) and
Vanguard Short-Term Investment-Grade Fund (VFSUX). Both have average durations <3 years.
abuss368 wrote:To circle back, we have moved some funds to the Vanguard Prime Money Market Fund. The yield is approximately 1.10%. We will begin to wind down our Savings account that is presently yielding 0.03%.
I think that's wise.
"Discipline matters more than allocation.” ─William Bernstein

User avatar
mickeyd
Posts: 4579
Joined: Fri Feb 23, 2007 3:19 pm
Location: Deep in the Heart of South Texas

Re: Vanguard Money Market vs. Savings Accounts

Post by mickeyd » Tue Aug 08, 2017 1:49 pm

I currently have cash in PMMF (1.10%) as well as Ally online (1.15%). (Both rising.) Also have cash in CDs @ NFCU and Ally. In addition I consider my STBF @ VG as cash. Spread it around and rake in the cash.
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle

User avatar
Artsdoctor
Posts: 3362
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

Re: Vanguard Money Market vs. Savings Accounts

Post by Artsdoctor » Tue Aug 08, 2017 2:21 pm

Regarding the short-term investment grade bond fund, just bear in mind that it dropped about 10% during that 2008-ish meltdown. It rebounded in 2009 like most funds but if you were really counting on it being there "when you needed it most," you would have been disappointed. I don't think anyone would seriously consider it a "cash-equivalent" emergency fund although if you're thinking of it as a second rung on your emergency access meter and are willing to take a certain amount of risk, no problem.

BigMoneyNoWhammies
Posts: 93
Joined: Tue Jul 11, 2017 11:58 am

Re: Vanguard Money Market vs. Savings Accounts

Post by BigMoneyNoWhammies » Tue Aug 08, 2017 3:06 pm

abuss368 wrote:
ny_knicks wrote:There are plenty of FDIC insured banks w/ savings accounts that have APY > Vanguards Prime Money Market Fund.

Goldman Sachs is one example paying 1.2% APY. Seems like opening a new savings account with a higher APY checks off a lot of your list.
Good points and I liked the Soldman Sachs note. I thought one needed to have a 8 digit account minimum to open!
I use the GS Bank savings account to park my money until I decide what to do with it as well. the 1.2% APY is basically as good as you'll find as a short term parking spot for your money that is also insured against loss. Have used them since Oct '16 and have no complaints whatsoever with their services. When I have withdrawn money it has been quick and painless.

User avatar
Uncle Pennybags
Posts: 1836
Joined: Tue Oct 28, 2014 2:05 am

Re: Vanguard Money Market vs. Savings Accounts

Post by Uncle Pennybags » Thu Aug 10, 2017 11:10 am

Artsdoctor wrote:Regarding the short-term investment grade bond fund, ...
That is the safest investment that will keep one even after taxes and inflation. FDIC is safer but one is guarantied a real loss.

User avatar
Artsdoctor
Posts: 3362
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

Re: Vanguard Money Market vs. Savings Accounts

Post by Artsdoctor » Thu Aug 10, 2017 12:57 pm

Uncle Pennybags wrote:
Artsdoctor wrote:Regarding the short-term investment grade bond fund, ...
That is the safest investment that will keep one even after taxes and inflation. FDIC is safer but one is guarantied a real loss.
Which would bring up the concept of safety and what that term means to each of us. Each of us has to come to grips with the fact that nothing is really safe. The cash in the mattress can catch fire, inflation can destroy your bonds, we all know of equity risks, etc., etc.

The chances of another 2008 would be very low. I think a lot of investors at that time were disappointed in the way some "safe" investments performed during the meltdown and investment-grade bond funds clearly suffered miserably. I believe even Bill Bernstein had been recommending the short-term investment-grade bond fund prior to the meltdown for short-term liquidity and was quite surprised at how it melted like so many other things. Of course, if you held on to the fund and even reinvested the dividends, you made everything back and a year later and you were just fine. However, I was alluding to having to sell something when you HAVE to. At one point, the short-term investment-grade bond fund was down 10% and if you HAD to sell that (i.e., for your "emergency" fund), you simply lost that money and certainly didn't make it back since it was gone forever.

I would have generally thought that everyone had a cash cushion of some sort although I have come to appreciate that some investors actually have no cash whatsoever aside from checking account money. In my own frame of mind, I would use up cash and spend dividends for urgent expenditures, prior to moving to short-term bond holdings, but if someone has no cash anywhere, you've presumably made your peace at having to sell at a loss when/if you have to.

User avatar
sperry8
Posts: 1550
Joined: Sat Mar 29, 2008 9:25 pm
Location: Miami FL

Re: Vanguard Money Market vs. Savings Accounts

Post by sperry8 » Thu Jan 04, 2018 12:38 pm

Is one allowed to invest in Vanguard Prime Money Market via another bank? For example, with Citibank I can enroll in their Citi Personal Wealth Management acct to buy stocks/etfs. However, am I also allowed to buy Vanguard Prime Money Market via these sorts of accounts?
Humbling BH contest results: 2017: #516 of 647 | 2016: #121 of 610 | 2015: #18 of 552 | 2014: #225 of 503 | 2013: #383 of 433 | 2012: #366 of 410 | 2011: #113 of 369 | 2010: #53 of 282

User avatar
indexfundfan
Posts: 2130
Joined: Tue Feb 20, 2007 11:21 am
Contact:

Re: Vanguard Money Market vs. Savings Accounts

Post by indexfundfan » Thu Jan 04, 2018 1:07 pm

sperry8 wrote:
Thu Jan 04, 2018 12:38 pm
Is one allowed to invest in Vanguard Prime Money Market via another bank? For example, with Citibank I can enroll in their Citi Personal Wealth Management acct to buy stocks/etfs. However, am I also allowed to buy Vanguard Prime Money Market via these sorts of accounts?
It depends on whether Citibank offers the fund for purchase. But my guess is that Citibank does not offer this fund because they prefer you to invest in one of their own funds, or they might have a huge transaction fee to purchase/sell this fund.
My signature has been deleted.

oliverwendellholmes
Posts: 17
Joined: Fri Jan 26, 2018 4:00 pm

Re: Vanguard Money Market vs. Savings Accounts

Post by oliverwendellholmes » Sun Jan 28, 2018 10:05 am

I'm new to Vanguard, VMMXX is at 1.46% yield minus the 0.16% expense ratio; does this make it a real 1.30% yield? If so, what benefits are there to having a VMMXX with the same yield as an FDIC insured online savings bank like Ally, which just raised its rate to 1.35%? Also given that there is a $20 annual fee for the MM

Dottie57
Posts: 3672
Joined: Thu May 19, 2016 5:43 pm

Re: Vanguard Money Market vs. Savings Accounts

Post by Dottie57 » Sun Jan 28, 2018 10:15 am

I have higher yielding CDs at a brick & mortar bank along with a mm account. I could get higher (slightly) rates, but I know and like the people who work in the bank. Sometimes supporting those who work for the community by using their services overrides.

thangngo
Posts: 1043
Joined: Sun Feb 26, 2017 2:08 pm

Re: Vanguard Money Market vs. Savings Accounts

Post by thangngo » Sun Jan 28, 2018 10:20 am

oliverwendellholmes wrote:
Sun Jan 28, 2018 10:05 am
I'm new to Vanguard, VMMXX is at 1.46% yield minus the 0.16% expense ratio; does this make it a real 1.30% yield? If so, what benefits are there to having a VMMXX with the same yield as an FDIC insured online savings bank like Ally, which just raised its rate to 1.35%? Also given that there is a $20 annual fee for the MM
The yield is after the expense. Where you want to keep your money is your preference. It does not have much difference.

stan1
Posts: 5627
Joined: Mon Oct 08, 2007 4:35 pm

Re: Vanguard Money Market vs. Savings Accounts

Post by stan1 » Sun Jan 28, 2018 10:26 am

oliverwendellholmes wrote:
Sun Jan 28, 2018 10:05 am
I'm new to Vanguard, VMMXX is at 1.46% yield minus the 0.16% expense ratio; does this make it a real 1.30% yield? If so, what benefits are there to having a VMMXX with the same yield as an FDIC insured online savings bank like Ally, which just raised its rate to 1.35%? Also given that there is a $20 annual fee for the MM
The Prime Money Market yield is net of expenses so you do not need to subtract the 0.16% yourself. Also, would not be paying an account maintenance fee if you have e-delivery of documentation. Agree FDIC insured choices such as Ally and Marcus are pretty close to Prime MMF yield right now. All other things equal I'd choose an FDIC insured product over one that is not FDIC insured. For most of the past decade FDIC insured products had higher yield than money market funds but that is not always the case.

UpperNwGuy
Posts: 574
Joined: Sun Oct 08, 2017 7:16 pm
Location: Washington DC

Re: Vanguard Money Market vs. Savings Accounts

Post by UpperNwGuy » Sun Jan 28, 2018 11:28 am

The sheer length of this thread is totally mystifying to me. All you need are pre-established verified ACH links between your primary checking at your home bank and (a) a bank (such as Ally) with high yield savings accounts and (b) Vanguard (or some other brokerage that offers money market funds). You can move your short term savings from to place as the rates change as often as you want with no hassle. These are not big life-or-death decisions.

Post Reply