3 Easy Ways to Make More on Your Cash Savings

cash and cash equivalent savings options

The last decade hasn’t been great for savers. Bond yields were less than 1%, big banks paid nearly 0% in savings accounts, and money market funds didn’t offer much return either. Well, the tables have turned over the last year. That’s great news for cash savers.

Before you stuff your savings under your mattress, we think you should consider a few other options. As the Federal Reserve fights inflation, interest rates have reflected the increased cost of borrowing. Inflation is now below the interest rates for many of these cash and cash equivalents, making them a more attractive opportunity.

High Yield Savings Accounts

If your cash savings are sitting in a big bank, you’re most likely getting hosed on the interest rate paid to park your money there. Enter high yield savings accounts. These accounts offer a hefty return. Most of the top high yield savings accounts pay over 4% APR (as of publishing this article). Some pay even more.

These banks are able to offer higher yields because most of them keep their overhead costs low. Instead of having physical branches, they are online only (or mostly). You still get access to a network of ATMs, wiring funds is easy, and digital transfers are a breeze.

Banks like Capital One and Ally are some of the more popular online banks. They both come with great customer retention, offer additional banking products, and have easy to use online interfaces. Their online savings accounts offer significantly higher yields than the traditional savings accounts, and are easy to use, manage, and earn interest.

High yield accounts will typically pay interest monthly as well.

U.S. Treasury Bills, Bonds, and Notes

Known as the world’s safest investment, consumers can tap into even higher rates by investing in cash equivalent U.S. Treasury Bills, Bonds, and Notes. You can buy Bills, Bonds, and Notes via TreasuryDirect.gov (directly from the U.S. Treasury) or via your broker (ie. Charles Schwab, Vanguard, etc).

Treasury Bills (Bills), are short term investments. Bills are sold at a discount. When the term (ie. 8 weeks) is up, you’re paid the face value of the Bill. For this reason, there are no distributions.

Treasury Notes are issued in 2, 3, 5, 7, and 10 year terms. These are longer term commitments, but they can be sold. This is a fairly easy process when holding your notes in your brokerage account. Interest is paid every 6 months

Bonds are very long term investments. They come in 20 and 30 year terms. For this post, they’re not the best fit for a cash equivalent option.

Money Market Accounts and Funds

Money Market Accounts (MMAs) are interest focused accounts. They operate similar to a checking account – you typically have a debit card and the ability to write checks – but with interest rates higher than a typical bank. You can also use money market funds. These are mutual funds that you can hold in a brokerage/investment account. MMAs and funds generate higher yield by investing in short term debt, like Treasury Bills.

They offer savers some flexibility through access, and the ability to pull funds (or sell) when needed.

VMFXX is one of the more popular money market mutual funds available.

Conclusion for Cash Savers

The 2020s have been a little chaotic so far, but despite the start of the decade, savers are finally being rewarded. Major financial institutions use tools like these to improve their return on cash. If you’re looking for alternatives to a zero yield savings account, these three options might be a great place to start. Consider your savings goals, and talk to a financial advisor before making any major savings or investment decisions.



Reader Interactions

Leave a Comment