After tracking our spending for August, I took a glance at the various accounts we have at E*Trade. We sure have a lot sitting in cash, and getting lousy interest rates:
Money Market: $33k @ .4%
DH investment: $20k @ .4%
Savings: $17k @ .8%
Checking: $ 7k @ .4%
I like having everything in one place so I want to stay with E*Trade, but I think it's time to look at some better options for how we are holding the cash.
The money market holds our emergency fund ($19k) and the proceeds from a recent sale of ESPP stock and stock options ($14k). I'm thinking perhaps we should move the emergency fund into CD's -- it's only to be touched in a major emergency like a job loss.
DH has his own account for stock trading. He just hasn't been active lately and is letting it sit in cash. That's fine, his choice. I just wonder if there are more money market options where it could sit and earn more interest until he spots a stock he wants to buy...
The savings account currently holds money for the following:
* $4k money accruing for the semi-annual bills (property tax, insurance, etc.)
* $4k money accruing for estimated tax payments
* $3k reserve to cover minor emergencies (car repair, home repair, medical deductibles)
* $6k short-term savings (Christmas, birthdays, vacation fund, etc.)
The balance in the savings account has fluctuated between $7k - $33k in the last year. I don't want to tie it up in anything where I have to remember to transfer balances around when big bills come due...
The checking is of course just a holding place for all our monthly spending. Paychecks come in, a portion gets sent to savings, and the rest flows out to pay bills. Any interest earned here is just a bonus.
Just checked the E*Trade CD rates -- not very promising:
Term Length 3-month 6-month 1-year 1.5-year 2-year 3-year 5-year
APY1
3 month: 0.15%
6 month: 0.20%
1.0 year: 0.45%
1.5 year: 0.55%
2.0 year: 0.65%
3.0 year: 0.75%
5.0 year: 1.40%
Any suggestions?
Earning interest on cash
August 29th, 2009 at 03:29 pm
August 29th, 2009 at 04:04 pm 1251561867
Some of the Money Market Mutual Funds had decent returns last 2 years, but I don't even know how low the returns are right now - probably similar to what you are getting. They have dropped significantly, where once they were similar returns to our online bank. (Vanguard Prime and Fidelity Cash Reserves were some of the best when I last researched. The market has turned upside down, since).
We are currently using Ally bank for all our savings (2% today? They have been competitive, over the long run). Once or twice a month we just transfer over what we need to our checking account. In the grand scheme of things, it's little hassle for much better returns. The hassle is planning ahead a bit since you can't transfer every day without getting fees, etc. I think maybe 5 external transfers a month - by law?
I did recently read an article that recommended a couple of vanguard bond funds for cash, but I didn't buy it. I had much better returns shopping around CDs and sticking with online savings accounts. The one bond fund that did a lot better (8%? the last few years?) came with much more risk. You have to critically think through some suggestions out there.
Good Luck!
August 29th, 2009 at 04:24 pm 1251563057
August 29th, 2009 at 06:12 pm 1251569530
August 30th, 2009 at 12:41 am 1251592900
Lately I've found that I can get as good a deal or better at local banks (compared to on-line banks).
When I rate shop, I always make a virtual stop at the Bank Deals blog. Don't know the guy is who takes the time to put all that info together, but everything I've read about there & followed up on has been accurate.
Here's California specific info:
http://bankdeals.blogspot.com/search/label/California?max-results=40
In California, the Alliant Credit Union rate looks good (1.75% checking; 2.00% MMA). I checked their web site, and it looks like you can join in if you or a family member work for or belong to a number of organizations. As the Bank Deals site mentions, joining the PTA is an option if you don't qualify otherwise.
September 10th, 2009 at 09:46 pm 1252619207
We are in about the same place as you guys.
1 kid
2 cars leased
0 cc debt
350k mrtgag
assets cash over 500k
invested personal 350-400k
401k 400k
my wifes look about the same maybe a little more.
My man John is so worth having a talk to. well if you would like here you go.
usafinancialplanning@gmail.com His name is John.
Mahalo,
Robert