Where should I keep my cash?

Question

I have recently inherited a triplex where I live in one unit and rent out the others. I would also like to start saving money to buy another property. So this is sort of a two part question: where should I put cash that I have set aside for expenses? (Should I invest it somewhere? Keep in savings account? Any other options?) also what should I do with the cash that I am saving to buy another property in a year or so from now?

Mack Benson · Answer

For money that is being set aside for expenses you probably want it to be very liquid or else you may need to break out the credit cards to make emergency purchases. If you are in the club that plays the credit card points games that may be something you want to do but most people want their expense reserves at an arms length so it's easily accessible, either in a savings or checking account. You probably want to avoid cash under the mattress on this one.

For the cash you are saving for your next purchase that's a bit more complicated and depends on your timeline and risk tolerance. A savings or checking account is generally a safe bet but you won't get much as far as interest goes (I've heard some credit unions pay out decent rates on savings accounts but I don't have any firsthand experience). You could check money market accounts but that is probably still paying at or less than 1% right now. A long term play could involve an IRA, whole life, or solo 401(k), if you qualify.

Personally I plan on deploying capital as soon as possible so prefer the employer matched 401(k) and savings/checking.