So S21 has some money saved up that will be needed for post college to get started in life (in a BFA acting program so will have to get settled on his own in an HCOL city hopefully on his own. He maxed out an I Bond this year and has a Roth that has been steadily loosing money in the current marked. Any other thoughts for a safe place to put some of the money that will make more than 0.02%?
Marcus savings account rate is at 1.5% right now and CD at 2.3%. Some credit unions have checking accounts with some requirements at 2%.
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Thanks! This is exactly the kind of thing I was looking for!
How much $$? I bonds through treasury direct change interest every 6 months. Itās tied to inflation. You can buy up to $10k a year.
The first 6 mos are 9.62. Then it will change.
They are US govt securities so safe.
You hold for 5 years or give 3 mos interest back if sell earlier. . I bought. If the rate goes way down so Iāll lose 3 months if I sell. No big deal. My first 6 months was 7.2%. I bought in the previous round.
One thing - I donāt believe you get paid til you sell so you are not earning while the feds hold your money. You get paid at time of sale.
Was easy to set up and purchase.
https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm#now
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Yup! Did that already!
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You can also buy T-bills and T-notes through Treasury Direct. 8-weekers pay 2-1/4% or so. You can keep rolling them over, or buy longer terms. The interest isnāt great, but itās a heck of a lot better than youāll get from a HYSA or CD.
If his time frame is ultra short, chasing return is more hassle than itās worth once one has maxed iBonds.
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I think the savings account mentioned above through goldman sachs is the perfect answer. they have CDs that are 2-3% depending on length and are easy to open. That was exactly what I was looking for, love when CC comes through!
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It really depends on his exact time frame and how illiquid he can be. It depends on the state for rates, but there are reasonable quality 5 year annuities paying up to 5%. Itās hard to beat Marcus or their equivalents as fully liquid short term place to park money. As I said though, it depends on the amount and time weāre talking about. If itās a $1000 is the hassle of opening a new account worth it to make what would amount to a hamburger, coke and fries?
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Hereās another idea for S. I apologize for length, itās really not very complicated.
Iām assuming that since S bought I Bond he has no immediate need for money. If he has more $$ he doesnāt need any time soon, try Fidelity Investment website. It can be another investment firm website (eg Fidelity, TD Ameritrade, etc) but Iām saying Fidelity only because S can create a guest acct using made up credentials that is good for 30 days for the sole purpose of checking out CDs sold by Fidelity. Once in click on Investment Products, then Fixed Income, Bonds & CDs, then click on search investments. Then click on CDs and ladders.
S could choose from a wide range of CDs and maturities. For example there is currently a Wells Fargo CD with 9 month maturity at 2.9% APR. These CDs are referred to as brokered CDs (CDs sold by brokers.) Itās my understanding that banks pay brokers to sell these CDs, so thereās is no charge/fee to buy these CDs.
Next to any CD note if issuing bank is FDIC insured. Also note if a CD is āyesā call protected meaning in case of Wells Fargo 9 mo CD , S gets 2.9 % APR for 9 months as opposed to say Ally Bankās 3 year CD at a rate of 3.55 % APR. Allyās CD is āNOā meaning itās not call protected meaning if rates drop, this 3.55 APR rate could drop.
Negatives:
the CD rates are APR, not APY, meaning these rates do not compound; In a short term CD, the difference between APR and APY is negligible especially if the CD amt is not that great.
if S needs $$ before maturity, he could sell CD, but at a possible loss, or gain depending at where rates go. S should be sure he absolutely will not need to access funds before maturity. There may be a fee for selling before maturity?
Just like I Bonds, you cannot withdraw interest during CD term and interest may only be paid annually, semi annually.
Positives
When buying CD, S can set up to have money (principal/interest) automatically dumped into a Fidelity money market acct upon maturity where it will stay until S acts (eg wants to withdraw money or buy another CD).
Also at maturity there is no grace period that ends and then locks in and renews CD automatically which may be problematic if S forgets to act during grace period.
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Amazing! He already has a fidelity account for his Roth, I didnt think to search in there for CDs, their savings accounts make a tiny amount but a CD is definitely a good idea. He does not need the money for three years. He worked for me in my small business through high school along with summer jobs and goes to a school that was below budget so he has a significant amount
He is in the fortunate place that it is not a tiny amount since he worked at my small business through high school and since his school is under budget he did not need to contribute. He will have high expenses when he graduates so even a few years at a few percent may be helpful.
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Donāt buy a CD in a rising rate environment, even if he doesnāt need the liquidity.
So what do you suggest?
If youāre looking short term a timed cd for your period is fine but with the fed raising your online brokerage money market is gonna likely be better. Just bcuz youāre not talking a huge soread and with a cd u lose flexibility.
Not sure how much he has. But other options.
Short term muni bondsā¦can get 3% tax free but whatās the bracket and how much does he have and define short term. 3 years ? 10 years ? At 12 years u can get 4% lending to Illinoisā¦and no they arenāt going broke. Thatās 4% tax free.
And if your ballsy but you canāt protect principal. But letās say u have $5k. Put into 10 blocks. Buy high dividend highly deflated stocks like intel. Verizon. AT&T. Get dividends for interest and u may make money too. But thatās the problem. U may also lose it :). Kidding on that one but u can gain income. But itās not for safe money. Lots of 5%+ dividends on solid companies tho.
He must have decent coin since u said u did the I bonds. Take the online money market and donāt look back. If they have a short term cd at a slightly higher rateā¦like 3 mosā¦u could do that but lose flexibility for probably just a few bucks.
Good luck.
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Thereāre quite a few savings accounts (FDIC insured) that pay north of 2% right now. I expect these rates will continue to rise.
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Every time the fed raises. Next is sept I think.
yeah I am not intested in stocks, we have been losing hand over fist and this money cannot be lost, it is his ānest egg.ā I think the short term CDs and money markets are the way to go, thank you!!
If you want non-stock guaranteed interest, you can google for highest interest rates and lock the money in a CD or go for a checking account with no fees. The online only banks often have the highest rates to attract the money.
Honestly though, Iād buy stocks. Stable, boring, dividend paying stocks esp given how high inflation is and how weāre tilting into a recession. But yes, I get it. My Dad is a bank saver and never wanted stocks.
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Agreed. This is the safest, most liquid option for must have money on a short time horizon, no matter the amount. Liquidity and capital preservation seem to rule all in his immediate term. Chasing a higher return comes at a risk.
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