Cash Management Strategies

Savings Accounts

Most people have a savings account but don’t know the annual interest rate with their bank. This creates an easy opportunity to research the market and move your savings account to a bank with a more attractive APY (annual percentage yield). Although Savings Accounts typically offer lower yields than CDs, they allow you to withdraw your cash at any time without penalty.

Certificate of Deposit Accounts (CDs)

CDs are investment products that pay a specified income rate on a lump sum of cash. Typically, they offer a higher interest rate than a savings account, but they are not liquid, meaning that your money is “locked up” for the duration of the CD (usually 6-12 months.) You can break the piggy bank early, but hefty penalties are typically involved. CDs are a great option if you’re holding onto cash you don’t need soon.

Money Market Funds

Money Market Funds are mutual funds you purchase through a brokerage or IRA account. These funds hold short-term investments like U.S. Treasuries and provide stable income to investors. You buy shares of the funds, receive income, and can sell them like any other investment. The rates are attractive but have embedded fees and often require a minimum investment amount. If you manage your own investments, Money Market Funds are a great alternative to keeping cash in your portfolio. Right now, a laddered 6-month treasury strategy yields rough 5.4% as well, which would be another good option for excess cash.