A Beginner's Guide To Investing Cash In Vanguard

Investing your cash with Vanguard can be done in several ways, including the Vanguard Cash Plus Account, money market funds, or brokered certificates of deposit (CDs). Vanguard is a good option for those looking for competitive earnings on their savings, with cash investments providing a great opportunity to earn money while saving for short-term goals. Cash investments are readily available short-term financial instruments with high liquidity, minimal market risk, and a maturity period of less than three months. Vanguard offers a range of investment options, including stocks and shares ISAs, general investment accounts, self-invested personal pensions, and junior investment ISAs. With low fees and an easy-to-use platform, Vanguard is a popular choice for those looking to grow their savings.

How to add cash to your Vanguard account

To add cash to your Vanguard account, you can use a debit card, a bank transfer, or a cheque.

Using a debit card

If you're using a debit card, log in to your Vanguard account and select 'Payments' from the left-hand menu. Then, choose 'Add cash' next to the account you want to add money to and follow the on-screen instructions. It will take up to one working day for your payment to clear.

Using a bank transfer

You can also transfer money from your bank account to your Vanguard account through an electronic bank transfer (EBT) or wire. For a single payment, you can use a bank transfer or set up a Direct Debit for regular payments. It takes up to two working days for a bank transfer to clear, with a minimum transfer amount of £50,000.

Using a cheque

You can also buy Vanguard fund shares by mailing a cheque. Use the online process to generate a printable customised form, which will include the Vanguard mailing address. If you have a brokerage account, you must select your settlement fund in the 'Where's the money going?' section to see the option to purchase by cheque.

Vanguard Cash Plus Account

The Vanguard Cash Plus Account is a cash management account that offers a competitive annual percentage yield (APY) on your short-term savings. It features a bank sweep insured by the Federal Deposit Insurance Corporation (FDIC) and functions as a low-risk place to keep cash for immediate needs and emergencies. The APY varies depending on market conditions and currently stands at 4.7%.

The Cash Plus Account has no minimum balance requirement to open or maintain your account, allowing you to save as much or as little as you prefer. However, some account fees may apply. Your cash in the bank sweep is eligible for FDIC coverage up to $1.25 million for individual accounts and $2.5 million for joint accounts.

In addition to the bank sweep, you have the option to purchase any of the five Vanguard money market funds available in your Cash Plus Account, each with a $3,000 minimum investment. These funds provide an opportunity for potentially higher returns compared to traditional savings accounts.

The account offers easy online transactions by providing you with routing and account numbers. This enables you to set up direct deposits with your employer and use the available balance to pay bills through apps like PayPal and Venmo.

The Vanguard Cash Plus Account simplifies your finances by allowing you to manage your cash and investments in one place when combined with a Vanguard Brokerage Account. It is important to note that the account has certain limitations, such as the absence of a debit card or ATM access.

Money market funds

You can invest in a money market fund by buying shares in one through a mutual fund brokerage firm, like Vanguard. Vanguard offers both taxable government and municipal (tax-exempt) money market funds. Their money market funds are offered with a stable $1 net asset value (NAV). All of their money market funds have a $3,000 minimum initial investment, except for the Vanguard Federal Money Market Fund, which has no minimum initial investment amount.

The annual expense ratios for Vanguard's money market funds range from 0.09%–0.16%, or $9–$16 for every $10,000 invested.

Certificates of deposit (CDs)

Vanguard offers "brokered CDs", which are issued by banks for customers of investment and brokerage firms. They can be bought in bulk by a brokerage firm and resold to brokerage customers. There is a minimum investment of $1,000 for CDs purchased through Vanguard Brokerage, with increments of $1,000 thereafter.

CDs are a good option for those who don't need the money on short notice and are looking for a low-risk investment. They can provide higher yields than some high-yield savings accounts and money market funds.

It's important to note that CDs are subject to market and interest rate risk if sold prior to maturity. The value of a brokered CD can decline due to rising interest rates, and longer maturities carry higher interest rate risk.

Understanding cash investments

Cash investments are readily available short-term financial instruments with high liquidity, minimal market risk, and a maturity period of less than 3 months. They are a great way to keep your money safer from market risk and can be a good option if you're saving for short-term goals. Cash investments include products that have the low risk and accessibility of cash, combined with potentially higher returns than traditional savings accounts.

Technically, cash isn't an investment. It refers to money that is not invested in the markets and has little to no market risk. It is easily accessible and has a maturity of 90 days or less, meaning you can withdraw your principal and any earnings within this period.

Types of cash investments include cash management accounts and money market funds. Certificates of deposit (CDs) are also an option, but they are not considered cash due to their longer maturity period and minimum investment period. Cash investments tend to generate more modest returns than stocks or bonds, as they are a safer option for your money.

The Vanguard Cash Plus Account is Vanguard's version of a cash management account. It is available to open using the online account opening process and offers a competitive annual percentage yield (APY) on your short-term savings. With no minimum balance requirements, you can save as much or as little as you like.

Money market funds are a type of mutual fund with ultra-short-term maturities, ranging from a few days to a year. They are considered lower-risk investments with stable share prices and high liquidity, allowing you to access your money quickly. Money market funds invest in low-risk assets, such as U.S. Treasury bills and CDs, making them one of the safest investment options.

When deciding where to place your money, consider how these options provide yields, how soon you need your money, and whether you prefer Federal Deposit Insurance Corporation (FDIC) insurance coverage.

Frequently asked questions