Savings accounts!

[disneysteve]

what about cold hard cash and I need let's say $1500 or $5000 in cash
Often I need thousands not hundreds.

Do you typically need that cash on the spur of the moment or do you know a few days in advance? If you have no warning, then you are correct that an online bank wouldn't be useful. If you can plan ahead, all you need to do is transfer money from your online account to your local bank.

We have a checking account at BOA. That's our daily operating account. I keep enough in there to cover 3-4 weeks of expenses. If something big crops up like an insurance or property tax bill, I just transfer money from Ally. The money is there in a couple of days. If I need cash, I can get it from BOA and replenish from Ally.

[crazyliblady]

I have 9 accounts with one credit union. They are my sinking funds for house maintenance, car replacements, appliances, car tags/taxes, escrow, etc. They are not earning much, but because it is a credit union, I get a dividend and interest. There is no monthly fee. I have thought about switching to another institution, but the interest would have to be better, with no fees, and easy to transfer to other accounts. I have 3 other savings accounts at another credit union, one of which is earning 3.92%. This credit union also does a profit payout every year that is based on the amounts you have in your various accounts, so the more you have, the more you get.

[QuarterMillionMan]

I don't know about you Kork but I rather withdraw $3000 or $5000 all at once and be done with it for half a year. Rather than going to an ATM and limited to $300 a day. I would have to keep going back 10x's or 15x's. More chances of me getting mugged and whacked over the head at the ATMs for $300, not worth it to me.

[QuarterMillionMan]

Yes disneysteve, I still need a brick & mortar bank and cannot do exclusively online banking yet.

[disneysteve]

Yes disneysteve, I still need a brick & mortar bank and cannot do exclusively online banking yet.

I see nothing wrong with that. As I said, we have our checking account at BOA. Sometimes I need cash. Or more commonly I need to get change - small bills for yard sales and estate sales and such. I can't go to an ATM and get 100 $1 bills.

We also occasionally need other services of an in-person bank. A few times we've needed Medallion Signature Guarantees for financial transactions. We went to BOA for those, and the service was free. Many banks will only provide those services to account holders. I'm not sure where you even go for that if you don't have a bank account.

All of that said, I see no reason to keep a ton of money at a physical bank earning nothing when with just a few clicks on my phone, I can transfer money from my online account to my physical bank as needed. The same goes for the money market/settlement fund in our Vanguard account. That pays even more than our Ally account and it is equally simple to transfer money to our checking account if needed.

[james.hendrickson]

Okay, so I want to ask the community this question:

Since inflation is running at 8%, why are we excited about a 2 or 3 percent interest rate on our savings?

[ua_guy]

Okay, so I want to ask the community this question:

Since inflation is running at 8%, why are we excited about a 2 or 3 percent interest rate on our savings?

a. Because 2% is better than losing even more money at 0.5%

b. Because 2% is better than YTD market performance.

[disneysteve]

Okay, so I want to ask the community this question:

Since inflation is running at 8%, why are we excited about a 2 or 3 percent interest rate on our savings?

Wouldn't you rather earn 2.5% than 0.01% regardless of what inflation is doing?

The stock market is down 20% or so, so you're not currently making any money there.

We currently have about 300K in our Vanguard settlement fund. That fund is paying 2.77%. That means we're earning almost $700/MONTH interest on that money. Now that I'm mostly retired, I plan to keep a couple of years worth of cash on hand so earning a decent rate on that money is very nice.

[james.hendrickson]

a. Because 2% is better than losing even more money at 0.5%

b. Because 2% is better than YTD market performance.

You know Ua_guy, I thought this through with a friend and we couldn't think of any other good alternatives for our liquid savings. The best alternative we could come up with was put the cash in a high yield account and just suffer the effects of inflation. This wasn't a great solution, but it was better than anything else we could think of.

[disneysteve]

You know Ua_guy, I thought this through with a friend and we couldn't think of any other good alternatives for our liquid savings. The best alternative we could come up with was put the cash in a high yield account and just suffer the effects of inflation. This wasn't a great solution, but it was better than anything else we could think of.

Generally speaking, money you are keeping in cash isn't intended to earn market returns. It's money you want to keep safe and liquid, like your EF or sinking funds for upcoming expenses or an approaching major purchase like a car or a house down payment. You don't want to take risk with that money, but you'd still like to get a decent return.

[ua_guy]

You know Ua_guy, I thought this through with a friend and we couldn't think of any other good alternatives for our liquid savings. The best alternative we could come up with was put the cash in a high yield account and just suffer the effects of inflation. This wasn't a great solution, but it was better than anything else we could think of.

I mean, no doubt there are ways to outpace inflation, but I think we're headed for uncertain times, and some of those things are less liquid, and much higher risk than keeping cash savings at a bank. And I think we'd agree that it's good advice to have an emergency fund and basic expenses tucked away in something like a savings account. So for those buckets of money, I agree, and that's kind of where we're at. For the money that isn't tagged for those things, I think what to do with that money is less clear.

[LivingAlmostLarge]

i have capital one as well. I think it's 2.20%

[bjl584]

Most of my cash is in a MM at Fidelity.
Interest rate is nearly non existent. I haven't really cared, since the past decade has been an environment of no interest on accounts, but maybe now I should start to pay attention

[disneysteve]

Most of my cash is in a MM at Fidelity.
Interest rate is nearly non existent.

Are you sure about that? The money market/settlement account at Vanguard is currently paying 2.7%.

You should definitely pay attention if you have any significant amount in cash. You can easily get at least 2.25% on cash today. Really no reason to settle for less than that.

[Drake3287]

I'm another with Capital One. Still currently 2.20% but it's been inching up slowing like most. Only reason I have this account is so I have a sizable amount somewhat quickly available and still earning a few bucks.