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Keeping Your Cash Liquid or Locked Up?

Deciding where to put your additional cash is sometimes a hair pulling decision. Typical bank rates are sad; the CD’s and Money Markets are just as depressing to think about. We can keep it liquid and not make as much or we can lock it up, make a bit more, but not have the access we need. So what are your options on where to stash your rainy day cash?

Savings Account: While these used to pay a decent rate, today you are lucky to get a half of a percent at most banks. They are great to keep your money close to you so you have access at all times, but actually growing your interest at a quick rate it not reality.

Certificates of Deposit: Many years ago, these were a good option to make a decent rate of return. While the rates have dropped, you can still find a decent deal now and then, especially for new money. The issue is of course, locking up your money for extended periods of time. If you have additional funds, this may not be a problem and would be worth some additional interest.

Money Market Funds: Similar to a checking account, these are enhanced checking accounts that will allow you to write some checks during the month and withdraw some cash too. Most banks allow up to 6 transactions per month. While you are not making as much interest as a CD, for instance, you do have more access than a CD allows.

Mutual Funds: Many mutual funds are being structured with portions of the cash available as liquid accessible to you as you need it. You can find funds that look and work like a checking account from your local bank. While your money is working harder for you at a brokerage or investment firm, your local access might be a bit more limited since you cannot go down to the corner bank and do business, unless your firm handling it located down the street. You may be charged access fees like ATM fees, so take that into consideration.

Keeping a portion of your money liquid verses locked up can be a delicate balancing act. It does take a bit of work to make sure your money is working hard for your needs too.

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