In this era of technological advancement and digitalized living, daily shopping is often done through credit cards or mobile payments, and cash is becoming less common. People tend to invest their spare money. However, no matter how advanced technology becomes and how prevalent paperless transactions are, cash is still king especially in times of economic crisis.
Currently, due to the ongoing trade tensions and geopolitical uncertainties, there is significant global economic uncertainty, and the risk of an economic crisis looms. Warren Buffet’s company, Berkshire Hathaway, has reached a record cash reserve of $347.7 billion in the first quarter of this year. For ordinary folks, having some cash on hand is a form of preparedness.
If you are looking to save, protect, and grow the cash you have, consider a secure and reliable account that offers interest on your balance. Here are seven methods for storing cash as suggested by Yahoo Finance:
Checking accounts are popular for their practicality, allowing easy access to funds for transactions, bill payments, and writing checks. However, most checking accounts do not earn interest, so the funds in these accounts typically do not appreciate. Combining a checking account with a savings account is an effective strategy since checking accounts are more geared towards spending rather than saving.
Traditional savings accounts are considered a safe place to store cash, but the drawback is the minimal interest they offer. The annual interest rate for many large bank savings accounts is around 0.01%. Unlike checking accounts, some savings accounts have transaction limits.
High-yield savings accounts function similarly to traditional accounts but offer competitive interest rates. Currently, the best high-yield savings accounts offer annual interest rates as high as 4.00%. Many banks with high-yield accounts operate entirely online to provide such high rates.
Money Market Accounts (MMAs) are essentially savings accounts that also offer check-writing capabilities similar to checking accounts. Compared to traditional savings accounts, MMAs usually offer higher interest rates, akin to high-yield savings accounts. However, MMAs may require a higher minimum balance.
Certificates of Deposit (CDs) offer higher returns but with lower flexibility. Some of the best CDs currently offer annual percentage yields (APY) as high as 4.25%. When opening a CD, you must select a term during which your deposit will earn a fixed interest rate, but you cannot access these funds without facing penalties.
If you know you won’t need the deposited amount for several months or years, CDs are a good way to earn predictable interest within a certain period.
Cash Management Accounts (CMAs) resemble checking accounts but are offered by brokerage firms instead of banks or credit unions. The best CMAs also provide competitive interest rates similar to other high-yield savings accounts, currently around 4.00% APY, and may include ATM cards and check-writing capabilities. Some CMAs also offer investment features, allowing easy transfer of funds from the cash account to an investment account.
The insurance structure of Cash Management Accounts varies, as brokerage firms are not covered by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA). However, they often partner with banks to provide FDIC insurance for cash in the account. This enables CMAs to offer standard insurance coverage of over $250,000 since brokerage firms can spread deposits across multiple FDIC-insured banks.
Treasury bills, also known as T-bills, are short-term debt instruments issued by the U.S. Department of the Treasury. Purchasing T-bills allows buyers to enjoy discounted prices, and upon maturity, they receive the full face value.
T-bills have terms of one year or shorter and can be purchased in increments of $100. They are issued electronically and can be bought through a broker or online using a TreasuryDirect account. T-bills offer relatively high liquidity, especially compared to CDs.
The current APY for the longest-term T-bills is over 4%. Although T-bills are not covered by the FDIC, they carry very low risk with backing from the U.S. government. One strategy involving T-bills is to purchase them after reaching the FDIC insurance limit at a bank.
All the account types listed above are safe options for storing cash, each with its own advantages and disadvantages. The best account for growing and safeguarding your funds depends on how you intend to utilize your cash savings. Generally, utilizing these accounts for savings, making use of their convenience and security, is a better choice than hiding money under the mattress and hoping for the best.
(Note: This article is for general informational purposes and does not constitute any specific recommendations. The Epoch Times does not provide advice on investment, tax, legal, financial planning, estate planning, or other personal financial matters. For specific investment matters, consult your financial advisor. The Epoch Times does not assume any investment responsibility.)