#035: Every Dollar Better Work As Hard As You Do

We all work hard for our money, but is all of your money working hard for you? If you’re keeping your cash in a regular checking account, you’re missing out on some serious opportunities. In today’s market, getting a 5% return on your cash is not just possible; it’s the norm.

Even if you're already doing an awesome job saving that 20% that we recommend towards your 401k, taxable accounts, etc, there is still "free money" on the table that you may be missing out on. As often as we talk about this with our clients & online, it seems EVERY WEEK I'm having a conversation with someone who ends up saying how they have $50k-$100k sitting in a regular checking/savings account somewhere. 

Let’s dive into why you should make every dollar count, even your cash.

Key Accounts to Look At:

1. High Yield Savings Accounts:

   • Traditional savings accounts often offer minimal interest. (I think my bank offers a whopping 0.02% - but we won't put them on blast today.) High yield savings accounts provide significantly better returns. In today’s market, you can easily find accounts offering up to 5% annual returns. This is a simple, easy way to grow your cash reserves. Every month, Nerdwallet updates their list of the top 5-8 currently being offered. 

2. Money Market Accounts:

   • Money market accounts combine the benefits of savings and checking accounts. They typically offer higher interest rates than regular savings accounts, with the flexibility of check-writing and debit card access. This makes them a great option for funds you might need to access occasionally. Again - today you can easily be obtaining 4-5% on your cash in the money market account. Once again - every month Nerdwallet updates their list of the top offerings so you can always stay up to date.

3. Treasuries:

   • U.S. Treasury securities are another excellent option for your cash. They are virtually "risk-free" (No-such thing as risk-free but this is as close as it gets) and currently offer competitive yields. The only caveat to Treasuries is we want to hold them for the full duration to ensure we get the full-yield. 
   • Here is what current rates look like as of today per CNBC for different durations:

Key Considerations:

1. Inflation Protection:

   • Keeping your cash in a regular checking account means it’s losing value over time due to inflation. By moving your cash to high yield savings, money markets, or treasuries, you not only protect against inflation but also grow your money. Inflation is sitting around 3.3% as of today, this means we need to be getting at least 3.3% on our money just to ensure we aren't LOSING purchasing power on our money.

2. Liquidity and Safety:

   • High yield savings and money market accounts offer liquidity, meaning you can access your money when you need it. Treasuries, while less liquid, are incredibly safe, backed by the full faith and credit of the U.S. government.

3. Opportunity Cost:

   • The cost of not investing your cash in higher-yield options is significant. At a 5% return, every $10,000 you leave in a low-interest account is costing you $500 annually in lost earnings. That’s money you could be making with minimal effort.
   • If you are someone who has been that example of having $50,000-$100,000 sitting in cash for the last 2-3 years, you could have cost yourself nearly $10,000-$15,000 that could be sitting in your pocket.

Conclusion:

Don’t let your hard-earned money sit idle. By moving your cash to high yield savings accounts, money market accounts, or treasuries, you can take advantage of the 5% returns that are currently available. It’s like leaving free money on the table if you don’t.

Make the smart move today. Ensure that every dollar you have is working just as hard as you do.