Best place to put 'invested' cash? CDs, high-yield savings, t-bills/bonds? Where have you found the best rates?

Submitted by aav_2202 t3_zz8xtu in personalfinance

My husband and I currently have a large balance sitting in our savings account, earning a shamefully low APY (too embarrassed to even say...). We're hesitant to put it in our brokerage account because we expect to pull from it in the coming year, and don't want to risk needing to sell positions when the market it down.

I'm new to investing and tried sitting down to research where the best place would be to temporarily park this cash (i.e., what bank, what type of account, etc), but have been overwhelmed by the options (and not sure which sources to trust). I wish I had more time to figure this out, but I have a newborn, a toddler and a rapidly ending maternity leave so trying to get this issue taken care of asap and without going down anymore online banking/investing rabbit holes...

Thank you so much!!

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mlachick t1_j2axj7p wrote

If you don't need the cash for a long time, an I-bond is still a good option. Other than that, I recommend HYSA. Mine are up to 3.5%.

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aav_2202 OP t1_j2cgrmq wrote

Thank you! The hard part is that I'm not sure when we'll need the cash. We subscribed into a PE fund and need to be able to wire within 10 business of capital calls, which can happen at any time. Can I ask what bank your HYSA is through? Any complaints?

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mlachick t1_j2cgwii wrote

I actually have three now - Capital One, Citi, and my local credit union.

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aav_2202 OP t1_j2cmial wrote

Thanks! Will keep Capital One and Citi on my list.

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wolf8sheep t1_j2b6uoi wrote

I bonds.

10k per person per year at the current rate of 6.89% where anything lower is losing to inflation. Thats 20k for 2023 as you likely missed out on having it processed for this year which you would have been able to park 40k in between December and January. They are liquidable after 1 year and you lose the last 3 months interest unless you hold it for 5 years. But depending on when you need the cash and when the consumer price index drops you can hold them for longer.

Just remember that I bonds don’t make you money they are capital preservers. Literally anything making less than an I bond is losing to inflation.

As for a more liquidable account I am a fan of nerdwallet and they rate SoFi banking as one of the best since they offer a checking account at 2.5% when you set up direct deposit plus a savings account at 3.5%. As far as I know SoFi is the only FDIC checking account offering that amount of APY although it is likely so they can attract market share and will not be sustainable long term.

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aav_2202 OP t1_j2covog wrote

Thank you! I kicked myself for missing the 9.62%, and wasn't sure if the 6.89% was still enough, assuming the rate drops in May and knowing we would likely liquidate at 1y and be hit with the 3 month penalty.

It looks like we might be able to still purchase for 12/31/22, and we had considered purchasing in the names of our two daughters as well. So in that case, we'd have 80k earning the 6.89% for the next 6 months, then essentially we'd get three months of interest at the May 2023 rate (assuming we liquidate at 1y mark)? I know it's dependent on inflation, but is there any speculation as to whether the rate may hold steady when it resets in May or if it's more likely to drop?

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wolf8sheep t1_j2ecmjb wrote

We can only hope that the cpi drops to the fed’s targeted 2% as quickly as possible since I bonds only preserve capital. Although from my readings it is likely to drop more slowly over the next 1-3 years.

Historically speaking one article I was reading about the fed’s approach during the inflation period of the 70’s to 80’s was they eased off rate hikes too early only to raise them again. No real good option though since the article also said that once the fed actually breaks the economy their hand is forced to ease off the rate hikes.

Consider too that if inflation does drop to 2% in May your money doesn’t lose purchasing power except for the last 3 months of interest if cashed out before 5 years. Right now everything not matching an I bond is losing its purchasing power.

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aav_2202 OP t1_j2ed5dw wrote

This is very helpful, thank you so much! :)

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KReddit934 t1_j2awxnp wrote

The simple solution is a high yield savings account. Open online at Ally.com or DiscoverBank.com or Capitalone360.com. I believe you can make it a joint account (though CapitalOne360 was a bit clunky for doing that.)

When the account is set up, link your existing checking account to transfer money into the new savings,account (or back out). Transfers take a couple of days but are very straight forward. (They are ACH, similar to direct deposit or online bill pay.) These are paying a little over 3% currently.

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aav_2202 OP t1_j2cp44u wrote

Thank you! Will look at these three!

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JimFromWheeler t1_j2axen8 wrote

>we expect to pull from it in the coming year

What is your exact timeline? There's no reason you can't lock it into something safe like a 6-month CD earning over 4% interest. If you put $25k into a 6-month CD earning 4.15%, you'd get just over $500 in that time. There likely are other options out there that will earn you more money but since you sound like you want little to no risk, a CD may be the simplest option.

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aav_2202 OP t1_j2cpq09 wrote

I wish I had a better handle on our timeline, but we subscribed into a PE fund and need to be able to wire within 10 business days of capital calls, which can happen at any time. I think we could safely put some into a 6-month CD though - do you what bank is offering the 4%+? I was mostly finding high 3%'s in my search. Thank you!

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lufecaep t1_j2b0a14 wrote

I'm a fan of t-bills. Most of them are currently well over 4% and state tax exempt. I've been buying the 8 week ones for a while now. But the 27 week ones are pretty close to 5%. But the 8 week seem to be the sweet spot between being reasonably liquid and a decent rate. The downside is that when they start dropping they tend to drop much faster than the banks. But when that happens you just don't reinvest them.

https://www.treasurydirect.gov/auctions/announcements-data-results/

There's plenty of HYSA accounts as well. Sofi seems to be one of the highest currently but they have all been slowly going up over the last few months.

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aav_2202 OP t1_j2cq5fe wrote

This is great to know! Will look here too, thank you!

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ahj3939 t1_j2bbswo wrote

Even the money market fund in your brokerage is paying something like 3-4% yield these days. You could put it in there without investing in stocks or bonds.

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