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Financial Tools: Stash Your Cash At the Right Places

Financial tools and money saving tips are two things that we care about here at Mint. Learn more about financial tools and tips in our blog article index.

Excessive cash lying around the house? Don’t want to tie them up in various investment accounts because you may need quick access to the Benjamin? Have no fear, we have the financial tools to help you out: Here are some worthwhile places to stash your cash while keeping those funds liquid.

Plain Vanilla Savings Account at the Local Bank

While not terribly exciting, a savings account at the local retail bank beats the Bank of Shoe Boxes and Mattresses, both of which pay 0% in interest yields – they are not one of the financial tools that deliver a return on your money. Most nation-wide banks will have entry-level savings accounts that have little or no fees (generally with a minimum balance requirement). You can also check out various local credit unions or community banks, as they will most likely offer better interest rates than the bigger institutions.

The funds you put there will be fairly liquid, and you can withdraw them whenever you need the cash via an ATM or a quick visit to the teller window. If you do decide to go with the savings account route, pay special attention to the minimum balance required to avoid fees, if any.

Jazz It Up A Bit With Money Market Accounts

Money market accounts will generally pay higher rates than savings account (think 4% versus 1%). Like savings accounts, they’re also FDIC insured (so your money is safe if the bank goes kaput). The downside is that money market accounts will generally require a higher minimum balance in order to avoid fees. Many money market accounts may also be tiered in terms of the rate they pay out (e.g., a $10,000 balance yields 1% interest, while a $20,000 balance yields 2%).

One unique caveat about money market accounts is that many of them have limited check writing capabilities (with certain restrictions depending on the bank or account). You’ll usually only be able to write about three checks per monthly cycle.

Be Even More Savvy With High-Yield Online Savings Account

The latest trend in the world of online banking is high-yield online savings account — a.k.a., Bank of Something Direct. Many online savings accounts will have significantly higher rates than their offline counterparts, with low minimum balances and low fee requirements (and at the leading banks, no minimums and no fees). Current rates hover around 5% APY.

These accounts are online only accounts, so services are limited through emails or call centers. Most will work in the same fashion. You open an account online, link the saving account to one of your offline checking accounts, and transfer funds via an ACH (automatic clearing house) to the prospective online savings account. To withdraw your funds, initiate a transfer online between your two accounts.

Because funds do take time to transfer (1–3 business days, and 3–4 days for some banks), this is far from direct access to your funds. Take that transfer period into consideration as you deposit your funds. Like other saving accounts, online saving accounts are subjected to Federal Regulation D, which limits your withdrawals to six per monthly cycle.

Although offering very competitive rates, high-yield online savings and money market accounts are definitely not for everyone. If you aren’t comfortable with the concept of “online-only,” steer clear. These accounts are also a bit of a “self-serve” style of banking, so if you need help you should realize that even with call centers, you may not have immediate access to service. Of course, it’s precisely because they lack those services and overheads that the banks are able to offer higher interest rates.

 

Choose high-yield savings wisely. Easily earn rates 11 times higher than that of the national average. Just pay careful attention to the minimum balance required to avoid fees; amount required to open account; and amount required to maintain yield.

 

Accelerate your saving. Here are two accounts that offer high yields.

E*Trade Max Rate Savings
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Find a Compromise by Laddering Certificate of Deposits

Don’t want to deal with an online-only account, but still want to get a better return than 0.1%? Laddering at your local banks may be an option. Certificate of deposits, or CDs for short, are funds you lend to a bank for a specific period of time for a guaranteed, pre-set interest rate. They usually come in many different “maturity periods,” or dates when the funds can be withdrawn along with accrued interest.

Those maturity periods range from three months, six months, a year, to even as long as five years. Generally, the farther out the maturity date, the higher the interest rate you’re paid. If you withdraw a CD early before it reaches that date, there are usually penalties involved, and you might lose some percentage of your accrued interest. Obviously then, CDs may not be as liquid as other accounts mentioned. Worse still, if market rates increase to 6% as your CD is locked into a 2% yield, you may not be earning as high of a return as you could.

In order to alleviate both of the problems mentioned (liquidity and locked rates), consider the option of laddering certificate of deposits. To ladder CDs, you start by taking your stash of cash and depositing them into several different CDs, each with different maturity dates. Take one at one year; another at two; and so on until five years down the road. As each of your CDs reaches its maturity date, you can consider reinvesting them into a longer period if rates are higher, or simply keeping the cash.

Minty Example: You’ve just received $10,000 from your aunt Mary Jane. You split the money into five different CDs of $2000 each. CD #1 is in a one-year term; CD #2 in a two year term; and so on through CD #5.

When CD #1 matures, you can reinvest it into a five-year term because your next CD will reach it’s maturity in a year. As CD #2 reaches its maturity date, reinvest it again into another five-year CD. You’ll continue to do this as each of your CD reaches its maturity date. In this instance, you are ensuring that you have access to some of your money within a one year period, and you can protect yourself against market rate changes as not all of your money will be locked away in a five-year term.

Remember, when you ladder CDs, you don’t necessarily have to do a five-year term as the example mentioned. As long as you keep it consistent and roll the matured CDs into the same term period, you can set shorter or longer terms depending on your situation.

Check out this very good CD Ladder Calculator, which helps you in planning your CD laddering strategy. You can set different waiting periods from three months, six months, to a year. The calculator will show you some options in CD laddering, and give you estimated rates depending on your term period.

Stashing Your Money At Places Other Than Under Your Mattress Check-List

  1. Shop around for the best saving account rates and consider the balance required to avoid fees; or better yet, find accounts that don’t have any fees.
  2. If you’re considering money market accounts, be aware of the minimum balance required to avoid fees, and be aware of the tiered interest rates, if any.
  3. Online high-yield savings accounts are fairly popular, so if you’re considering one, you can always find out more about a specific bank by typing its name into a search engine, one of the best financial tools, followed by the word “review.” As with other accounts, consider the minimum balance required to avoid fees, and the balance required to maintain yields.
  4. Laddering CDs is certainly still applicable these days, although they may take a little bit more work. Shop around for the best rate, and remember that you don’t always have to have all the CDs at the same bank! Plan and write out your laddering strategy, and make sure to keep it consistent as your roll your matured CDs into their longer-term periods.