-By Charles Brown, M.Brown Financial Advisors
-August 24, 2023
Individuals with cash sitting in low interest checking and savings accounts now have many options to beat the paltry yields being offered by banks. The Federal Reserve recently raised the Federal Funds Rate to a range of 5.25% to 5.50%, which means yields for savers are the highest they have been in at least a decade. Here are a few options for your cash.
High Yield Savings Account
High yield Savings accounts are usually offered by “online-only” banks to attract deposits. Each bank has its own rules, but in general the accounts are fully liquid as long as you do not take frequent withdrawals. Two popular high yield savings accounts are American Express High Yield Savings and MARCUS by Goldman Sachs. Click on the names to find their current rates*, which are close to 4.25% APY (Annual Percentage Yield).
Bank Certificates of Deposit
Yields on bank checking and savings accounts may be low, but bank CD’s do have decent yields today if you are willing to lock your money up for the predetermined period of time. Each bank will have its own small print, but you can usually exit CD’s before the maturity date for a penalty. A common penalty for exiting a CD early is three months interest. Banks offer a number of maturity dates for CD’s, commonly ranging from six months to five years. Check your local bank for their current rates. Depending on the length of the CD, rates are running between 4% APY and 5% APY as of 8/22/23.
Money Market Mutual Fund
Money Market Funds are technically mutual funds that can be purchased through an online brokerage account or a financial advisor. Unlike traditional stock or bond mutual funds that fluctuate in price, money market funds should always trade at $1 per share (Net Asset Value) and kick off interest to holders each month. Like traditional mutual funds, money market funds have expenses associated with operating the fund so your actual yield should be close to the stated yield minus the annual expenses. As of today*, money market funds are yielding around 5% per year net of fees. Here is a list of the current offerings from Charles Schwab.
The chart below shows the yield on US Treasury Bills over the last three years. You can see that rates have risen significantly since 2021. Treasury bills can be purchased at an online broker, through your financial advisor or at TreauryDirect.gov which is run by the US Treasury. Remember that these are bonds and bond prices can fluctuate so there is a chance you may see paper losses on occasion. However, treasury bills are backed by the full faith and credit of the US treasury. As long as you hold the bonds to maturity, you will receive your principal back along with any interest earned along the way. Current rates as of 8/22/23 are hovering between 5.37% and 5.58% depending on the maturity.
**The above article is informational in nature only and is not a recommendation to buy or sell securities. All information is gathered from sources believed to be reliable, but neither Charles Brown nor Ausdal Financial Partners, Inc guarantees the accuracy of the information. All investments carry a degree of risk. Individuals should consult with their tax and investment professionals before making changes to their investment portfolios.
***Securities and Advisory Services offered through Ausdal Financial Partners, Inc., an SEC registered investment adviser, member FINRA & SIPC. 5187 Utica Ridge Rd., Davenport IA 52807, 563-326-2064, www.ausdal.com. Sub-advisory services offered through M. Brown Financial Advisors, a registered investment adviser with the state of Illinois. M. Brown Financial Advisors is located at 2728 Forgue Drive, Suite 100, Naperville, IL 60564, 630-637-8600. M. Brown Financial Advisors and Ausdal Financial Partners are unaffiliated entities and only transact business in states where they are properly registered, or are excluded or exempt from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission or any state regulators. Ausdal Financial Partners, Inc. does not accept buy, sell or cancel orders by email, or any instructions by e‐mail that would require your signature. Information contained in this communication is not considered an official record of your account and does not supersede normal trade confirmations or statements. Any information provided has been prepared from sources believed to be reliable but does not represent all available data necessary for making investment decisions and is for informational purposes only.