Have you heard the news? Interest rates are at their highest levels in 15-years (but maybe not for long)! This is especially important if the interest is compounding!
One of the most frequently asked questions I get from clients, family, friends, and strangers is what to do with cash. Regardless of whatever monetary policy we have currently or in the future, taking advantage of high interest rates is a great way to take action now on your financial journey.
Whether you’re saving for an emergency, for the down payment on a home, or something else, traditional savings accounts have not kept up with rising interest rates. So where should you put your cash savings? Where you put it will depend on what the cash is for, your ability to take risk, and the duration of time before you might need it.
Certificates of Deposit (CD’s), High Yield Savings Accounts (HYSA’s), Money Markets, and U.S. Treasury-Bills (T-Bills) all have great short-term yields right now and are generating income that exceeds the most recent inflation numbers. There are pros and cons for each that you should consider.
CD’s:
- minimum risk
- in some cases, the biggest yields are in this category
- rate locked in for the duration of the CD
- should only consider this savings vehicle if you feel confident you do not need the cash for the term of the CD
- ome recent attractive CD offers come with stipulations; make certain to understand all the terms
HYSA’s:
- minimum risk
- the most flexible option
- rate can change (up or down) at any time
- a great place to put cash that might be needed over the course of the next 6-12 months
Money Market:
- minimum risk
- rate fluctuates daily
- this is an investment, rather than a traditional savings vehicle; may come with fees
U.S. T-Bills:
- minimum risk
- rate locked in upon purchase
- this is an investment, rather than a traditional savings vehicle; may come with fees
- yield is received as income upon maturity
- should only consider this investment if you feel confident you do not need the cash until the maturity of the T-Bill
There is no one right answer. Each of these products or a combination of them can be the right fit for you to maximize your cash income. You might want to use a HYSA for an emergency fund because it is relatively safe and easy to access. If you’re saving for a down payment on a house, and you think that interest rates may go down in the near future, you might want to lock in a higher interest rate with a CD or T-Bill.
Reach out to get help with finding the best fit for your cash. Schedule a complimentary call with us today!