Where do you park your money? In replace of a savings account.

66 Replies

Ive been trying to figure out where I should keep my savings where I can maximize its growth and am really curious to hear where you think is the better place to do so.   

I want to keep the money as liquid as possible yet gain the maximum amount of growth available.   Im looking to be able to withdrawal at the drop of a dime with no penalties and no minimum balance requiresments.  Does this exist?

Ive considered online banks with slightly higher yields, money market accounts, certificates of deposit but the rates arent attractive at all.   

Looking to hear where you savvy financial people park your money.

Thanks

"Withdrawal at the drop of a dime.."  = stock market.

"Withdrawal at the drop of a dime.." AND no loss of principal = savings account in a bank/credit union.

The best savings account rates i can find are 1%.  I was hoping someone knew of a better alternative.  Im not really interested in keeping my money in stocks as that I would consider investing with the risk of losing money.  I currently invest in real estate and will continue doing so.   What I mean by parking my money is literally just a temporary place to put it until I use it to purchase more real estate.   

Just a shame savings accounts dont offer higher yields.  Ive been told back in the days they were up to 5%.  I think that was in the 80s.

Previously, I used to put all of my savings into the stock market via a vangaurd etf - and to use that as my "savings account."  I did this because I felt that on average, I was likely to see the historical ~11% returns that market indexes return.  My thoughts were that even if I lost money in the short term, I was unlikely to lose using the stock market as my savings account over the long term.

Now that I've committed fully to Real Estate, however, I see several problems with that mindset and run my life much more like a business.  I need to be sure that I have cash on hand to deal with problems as they come up, and the few points of return that I might miss out on in the short term are fairly immaterial.

Your question comes up quite frequently actually.  I believe that as far as savings go, anything in the ballpark of $10,000 - $15,000 or less is fairly immaterial to your long-term objectives. Who cares if you earn 1-2% more per year on that?  I'd focus instead of accumulating $10,000 - $15,000 more every few months, and achieving very high returns with that capital invested in long-term real estate assets.

Go with a bank or credit union that makes life easy for you - close by, no fees, low hassle, etc.  Don't worry about squeezing an extra 1% on your $10,000 - that's $100.  Not worth it.

Focus on the big stuff, not the chunk change.  That's my view at least.

Joel, in summary, don't feel bad about getting only 1% return in return for the security and quick access to your money. 

@Joel A.

My wife and I have an amazing account at a credit union that actually gives us a 3.25% return on the checking account. There are some limitations, like the amount of money that is eligible for the rate (it has a cap), but in terms of 'parking money,' we have found that incredibly useful.

This credit union is in Michigan, and unless you have some tie to a foundation or family member there, you would not qualify. I recommend looking for a Texas equivalent. Community banks are always the places where you will find the best interest rates on savings. 

I'm facing the same dilemma. The stock market is going on a 6 year run that has been great for my IRA accounts since I've added a lot of principle near the bottom, but dumping my liquid cash into mutual funds which are at near record highs does not seem wise at this point.

If the fed does raise rates this year as anticipated we should all get better returns on our savings accounts, yet (i believe)  vast amounts of money will flee the stock markets in search of safer havens which actually pay some kind of yield.

So for now, sadly my liquid assets are staying in a money market account until I can find a good real estate deal that will give some cash on cash return which right now is also very hard to find in Southern California.  I'll be following this thread to see if anyone has some awesome ideas. 

A shame? Not really. Back in the early 80s inflation was at 14%! To get a "real rate of return" on a savings account, you've got to take the offered rate and subtract inflation. If a savings account is offering 10% (as some did in the 1980s) that sounds amazing, but if you subtract an inflation rate of 10%, you're making 0 in real dollars. Today, you can get 1% (if you're lucky) and inflation is hovering around 0%, so at 1% over inflation, it's actually a better deal than in 1980.


"Being liquid" and "having low risk" are valuable elements of an investment. You pay for those by having a low "rate of return".

Chasing yield probably doesn't make much sense at smaller principal amounts.  However at more significant amounts it may be worth accepting some risk to generate some return.  I would look for bond funds(probably an ETF) that invest in short-term high quality bonds.  It may have a slight loss if interest rates spike, but you pretty soon should get increased return from increased rates.  You won't get great returns but it should beat the meager rates for the typical savings account/CD.

Also your time frame matters.  If it is measured in weeks - go with the safest option.

I get 2.01% up to 50k at Coastal Federal Credit Union. You have to join a selected club and have 30+ transactions a month but it's worth it to me.

Me and my husband park our money in our heloc account. The interest we earn is the interest we save, if that makes any sense. By keeping our balance low, our monthly interest owed is not as high. We only withdraw funds once a month to pay bills.

Take another look yes stock market but it has been on a terror  for to long 

SELF STORAGE  extremely secure  and great cash flow i am sorry but not as liquid 

at the drop of a dime but boy the cash flow and the appreciation in property value

that we are getting at safebox-selfstorage.gmbh is like heaven send  and the main reason 

is cause self storage is so diversified 

HAVE  A GREAT DAY

I put a little cash in a 5 year CD at a credit union that pays 1.8%. There is just a 6 mo penalty for early withdrawal so not much concern there. Once past 6 mo it is profitable.

I keep small reserves in an online savings account just about 1% 

the bulk I keep in a mutual fund that I have ~3-4 day access to. Liquid enough for me, moderate risk, decent returns. I much prefer to have being sunk into real estate but this is  adequate between deals. 

For the record im talking about constantly having anywhere from 25k to 50k in this account with it fluctuating as I buy new properties but always keeping a minimum of 25k.

@Trevor Ewen  

That is an awesome rate for a savings account.  If i could find one like that in texas minus all the transactions needed that would be perfect.

@Alexander Felice  

 I may be interested in what you are doing.  3 - 4 days to access funds would be okay with me too.  Is there a penalty for taking it out? Minimum balance? What kind of returns do you get on that?  Did you pick your own funds or is there an adviser that does all that for you?  

I use Betterment to hold my money. I set a goal, length of  time, and set up auto deposit.

https://www.betterment.com/invite/stevenmartinez

For short term savings of 10k-20k  I find its pointless to chase returns, and rewards programs are the way to go. 

I have a savings account with citibank linked to my checking account.  If I keep the balance over 15k or and pay 2 bills a month (or some configuration of banking) I earn a good deal of bonus points.  You can use the points to buy things or use them to pay bills.  It's enough to pay my gas bill every month, which is about 10 dollarsa month. That's better then any interest return you will for short term without risk. 

I know Chase and AmEx also offers similar rewards. I am a miles junkie! I probably go on two trips a year from stupid reward program time wasting activities. 

@Verna M.

Hey Verna, im with you on that. I use my rewards card to pay for everything then i pay it off at the end of each month.  So im already utilizing that.  I get 1% back on that too.  Actually, as soon as im done wrapping up this new mortgage im getting, im going to cancel that card and get a 2% citi rewards card that I recently learned about.   Ill double my rewards.  

Im just trying to be as efficient as I can with maximizing returns.  I understand a lot of people think its a waste to chase returns at 20k or less but even if I did have a small amount like that, I would still make an effort to try and get a return.  No sense in not doing that especially if I can figure it all out while I work my day job.  Win Win!

Just about every bank out there will offer what is called a money market savings account.  They used to do a lot better than the 1-2% they do now but that is still better than the 1/2% that I get with a normal savings account.  

Cale Ferguson, Real Estate Agent in SC (#88326)

The 1% the banks are paying is called the risk free rate of return,  I think that says what you need to know.  If you want more interest you either have to accept more risk or tie up your money for longer which is an interest rate liquidity risk.  There still are no free lunches available.

@Jenny C.   to answer your question, your statement made no sense to me.  Can you briefly describe the math behind the risk free heloc investment  plan?

@Cale Ferguson

Yeah i looked into money market accounts, all the ones I found were actually even less then 1% around .89  They are horrible right now.  But yeah ultimately that is a little better then an actual savings account.

Originally posted by @Joel A. :

@Verna M.

Hey Verna, imthoug

you on that. I use my rewards card to pay for everything then i pay it off at the end of each month.  So im already utilizing that.  I get 1% back on that too.  Actually, as soon as im done wrapping up this new mortgage im getting, im going to cancel that card and get a 2% citi rewards card that I recently learned about.   Ill double my rewards.  

Im just trying to be as efficient as I can with maximizing returns.  I understand a lot of people think its a waste to chase returns at 20k or less but even if I did have a small amount like that, I would still make an effort to try and get a return.  No sense in not doing that especially if I can figure it all out while I work my day job.  Win Win!

 and I'm saying that 5-8 bucks a month cash is  better returnathan any sort of CD or short term money market account you will find.  I know this because I have looked at just about every product out there, you also said you wanted no minium balance and instant liquidity? That's a tall order to fill for anything north of 2%

you can have  the reward  points as a cash deposit to your checking account.  I don't know if you get a 1099 for interest earned income or not though

you will get a 1099 and have to pay taxes on any interest earned in a MM or CD and you don't have that with reward points so that's another bonus

@Steve B.

I would be willing to accept a little risk depending on what is out there but ultimately that is why I started this thread. I am looking for "free lunch" and was hoping somebody knew of where I can find it.

I was confused about Jennys remark also but then I think i figured it out. I think what she means is that she actually doesnt have any savings at all. She took out a HELOC to be used as emergency funds (savings if you will). So whatever of that money she does NOT use, she is saving the interest rate she would have to pay for that.

Originally posted by @Joel A. :

@Steve B.

I would be willing to accept a little risk depending on what is out there but ultimately that is why I started this thread. I am looking for "free lunch" and was hoping somebody knew of where I can find it.

I was confused about Jennys remark also but then I think i figured it out. I think what she means is that she actually doesnt have any savings at all. She took out a HELOC to be used as emergency funds (savings if you will). So whatever of that money she does NOT use, she is saving the interest rate she would have to pay for that.

I think jenny was trying HELOC arbitrage but I don't know if that still works.

If you are ok with a little risk there are various short term bonds. The stock market is liquid but volitile.  Then you introduce brokerage fees, so unless you're trading decent amounts you lose it to short term cap gains and broker fees. 

We need more info on how much and how long you're holding. 

@Joel A.

Unfortunately money is cheap right now. No one is paying good interest rates on short term deposits (savings, CDs, money market, etc.) because the fed will loan them money for next to nothing and the same thing goes for debt instruments (bonds, notes, preferred issues). Everyone is looking for the best return, but the monetary policy of the fed is essentially keeping money close to free, and it looks like they will keep it that way until at least October. Unfortunately rising interest rates is one of the few factors that can depress the economy as a whole, especially when wall street starts speculating on when that rise is going to happen. It's one of the reasons we have seen such sharp pullbacks in the market, and then an immediate return to a bull run once the fed FOMC (Federal Open Market Committee) releases meeting minutes with no indication of raising rates. 

Adam