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Thread: Where do you put your short term savings for the best interest rate?

  1. #1
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    Where do you put your short term savings for the best interest rate?

    Where does everyone park their short term savings for the best interest rate? I'm currently getting around 2% as an introductory rate, but that is going down next month.

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    Ally. It goes up and down with interest changes but earns so much more than regular bank.

  3. #3
    Senior Member Rogar's Avatar
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    I have a smaller amount in regular savings earning next to zero and also a one year CD at my local bank that's paying a little over 2%. I don't anticipate needing the money from the CD, but if I do it can be withdrawn with a little interest penalty. I have wondered what a money market with someone like Fidelity would pay.

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    Another Ally user here.
    Schwab money market pays virtually nothing; my Fidelity also pays nothing, .32% (just checked.)

    Ally is paying 1.9 in savings, which is down from where it was, and cd's are rolling over lower, too, but much better than Schwab or Fidelity.

  5. #5
    Senior Member rosarugosa's Avatar
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    I have an online savings account with Barclays Bank and they are currently paying 2.1%. They seem to be a little quicker to go up on their rates and slower to go down than Ally.

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    I am getting an APY of 2% at "Marcus" (Goldman Sachs Bank).

    Assuming a 25% marginal tax rate, the after-tax APY is 1.5%.

    As of July 2019, compared with one year ago:
    Headline CPI is up 1.8%.
    Core CPI is up 2.2%.
    CPI-W is up 1.58%.
    Personal Consumption Expenditure Deflator is up 1.5%.

    Thus, inflation, however it is measured, over the past year has been greater than or equal to the after-tax interest rates people can get on savings.

  7. #7
    Senior Member Rogar's Avatar
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    Quote Originally Posted by dado potato View Post
    I am getting an APY of 2% at "Marcus" (Goldman Sachs Bank).

    Assuming a 25% marginal tax rate, the after-tax APY is 1.5%.

    As of July 2019, compared with one year ago:
    Headline CPI is up 1.8%.
    Core CPI is up 2.2%.
    CPI-W is up 1.58%.
    Personal Consumption Expenditure Deflator is up 1.5%.

    Thus, inflation, however it is measured, over the past year has been greater than or equal to the after-tax interest rates people can get on savings.
    The current fixed rate for I-Bonds is .50% which is paid on top of the current rate of "inflation for urban consumers" (CPI-U). Tax on interest is deferred until you cash in and exempt from state taxes and you have to hold them for at least a year. There is a small interest penalty if you cash in before 5 years. Not exactly where you want liquid funds, but it's one way to at least try to keep up with inflation in a very secure investment.

    I bought a small amount back when the fixed rate was 1.0%, and have never regretted it.

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    @Rogar,

    For a longer-term holding period, I buy my limit of I Bonds at Treasury Direct annually. I believe Molly was asking about "short-term" savings, and I Bonds do not allow redemption within a year of purchase, so I would not say they are appropriate for "short term". I think you are right about I Bonds... not exactly liquid.

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    Can you tell me more about I Bonds? How do they differ from CDs?

  10. #10
    Senior Member Rogar's Avatar
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    Quote Originally Posted by Molly View Post
    Can you tell me more about I Bonds? How do they differ from CDs?
    Yes Dado, I- bonds are not a short term liquid investment. I mentioned it since you were talking about how to keep up with inflation. I just think they are a decent safe investment especially when interest rates are low and inflation is typical, but you pretty much have to hang onto them for at least a year.

    I-bonds differ from CDs a number of ways, but one main difference is that the return is calculated every six months based on the going rate of inflation plus a small fixed rate premium, rather than just one fixed rate for the duration like a CD. And at least until recently inflation and subsequent I-bond returns have given a little larger return than my short term CD's. The return may be small, but at least as long as you hold them you are assured to at least keep even with inflation, at least pre-tax. If at some time in the future interest rates look more attractive with CDs or other interest paying savings, you can always cash out as long as you've had them at least a year. I don't know if Dado would add more, the the details are slightly complicated and I think the expert references explain it better than I could.

    https://www.investopedia.com/terms/s/seriesibond.asp

    https://www.treasurydirect.gov/indiv...bonds_ibuy.htm

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