Cash Is King: Exploring The Best Investment Options For Your Hard-Earned Savings

Cash investments are a great option for those seeking low-risk, short-term investments. They are typically defined as investments with a maturity period of fewer than 90 days, offering high liquidity, minimal market risk, and interest payments. While cash investments may not yield high returns, they are a safe option for investors looking to preserve their capital. Money market accounts and certificates of deposit are popular choices for cash investments, with the latter functioning similarly to bonds. These investments are also useful for those seeking a temporary place to keep their cash while researching other investment products.

Money market accounts

When choosing an MMA, it is important to consider the interest rate, fees, minimum balance requirements, and withdrawal limitations. Some accounts may offer higher interest rates but also require a higher minimum balance or charge monthly fees if the minimum is not maintained. It is also important to note that money market accounts are different from money market mutual funds, which are considered investments and are not federally insured.

MMAs can be a good option for those looking for a safe and flexible way to boost their savings. They provide a competitive yield compared to traditional savings accounts and offer more accessibility to funds without incurring penalties, making them a suitable choice for an emergency fund. Additionally, the check-writing privileges and debit card access that some MMAs offer can be advantageous for those who need to make payments from their savings.

• Vio Bank Cornerstone Money Market Account: Offers a competitive interest rate of 5.30% APY with a $100 minimum opening deposit and no monthly fees.
• Quontic Money Market Account: Features a 5.00% APY with a $100 minimum opening deposit, a debit card, and customer service available on weekdays.
• Ally Bank Money Market Account: Provides a 4.20% APY with no minimum balance requirement or monthly fees, along with check-writing privileges and a debit card.

Savings accounts

There are several types of savings accounts to choose from. These include:

• High-yield savings accounts: These accounts earn a higher interest rate than a standard savings account but may require a larger initial deposit and have limited account access.
• Certificates of Deposit (CDs): CDs are FDIC-insured and generally offer a higher interest rate, especially with larger and longer deposits. You will have to keep the money in the account for a specified amount of time, or a penalty is charged.
• Money market deposit accounts: These accounts typically require a minimum initial deposit and balance and have a limited number of monthly transactions. They are FDIC-insured and offer lower interest rates than CDs, but the cash is more accessible.

Certificates of deposit (CDs)

CDs are a safer and more conservative investment option than stocks and bonds, but they offer a lower opportunity for growth. They are also one of the safest ways to invest your money because their rate is fixed and guaranteed, and CD investments are protected by the same federal insurance that covers all deposit products.

The Federal Deposit Insurance Corp. (FDIC) insures bank accounts, and the National Credit Union Administration (NCUA) insures credit union accounts. In both cases, up to $250,000 of your funds are protected in the rare event that the institution fails. If you are holding more than $250,000 in deposits, you can spread your funds across multiple institutions for full coverage.

CDs come in a variety of terms, from 3-, 6-, or 12-months to 4-, 5-, and even 10-year terms. The interest rates on CDs are mostly fixed, though there are variable-rate CDs that could earn a higher return if rates rise. Generally, the longer the term, the higher the interest rate.

CDs can be a good option if you have cash that you don't need now but will want within a few years. They can help you save for a vacation, a new home, or a car. CDs are also a good choice if you want to invest some of your savings more conservatively, with lower risk and volatility than the stock and bond markets.

One downside of CDs is that your money is locked into the investment. However, this can also be beneficial for savers who worry about spending their savings. The fixed term of a CD and the penalty for early withdrawal can deter spending.

Government bonds

In the case of US government bonds, specifically US savings bonds, investors lend money to the US government, which agrees to pay that money back later, plus interest. These bonds are backed by the full faith and credit of the US government. They can be purchased for as little as $25, and the maximum purchase amount per year is $10,000. They can be cashed in after one year, but if they are cashed in before five years, the investor loses three months' worth of interest. US savings bonds can earn interest for up to 30 years and are guaranteed to double in value in 20 years.

Treasury bills

T-bills are a good option for investors seeking a secure investment with a short-term maturity. They offer a low minimum investment requirement of $100 and the interest income is exempt from state and local income taxes. Additionally, investors can easily buy and sell T-bills in the secondary bond market.

However, T-bills offer low returns compared to other debt instruments, and they do not provide periodic interest payments before maturity. They can also inhibit cash flow for investors who require a steady income. Furthermore, T-bills are subject to interest rate risk, meaning their rate could become less attractive in a rising-rate environment.

To purchase T-bills, investors can either use a brokerage firm, which may charge a small fee, or buy directly from TreasuryDirect, the platform of the US Treasury. The steps to buy T-bills from TreasuryDirect are as follows:

• Gather the required information: Social Security number or taxpayer identification number (TIN), a US address, and checking or savings account numbers for payments.
• Visit TreasuryDirect.gov and log in to your account.
• Select the account type: individual, business, estate, organizational, or trust.
• Enter your personal information: TIN, US address, and bank account details.
• Create a username and password for your TreasuryDirect account.
• Verify your account, log in, and click on the "Buy Direct" tab.
• Make your choice: Select "Treasury bonds" and specify the desired amount.
• Review and confirm the details of your purchase, ensuring their accuracy.
• Submit the order by accepting the terms and conditions.

After submitting your order, you should receive an on-screen confirmation, followed by an email from TreasuryDirect confirming your purchase and providing a transaction summary. Your payment will typically be settled the next day, and at maturity, the yield will be deposited into your linked account.

Frequently asked questions