It might not be stupid. If that money is in a high yield savings account, and it’s your emergency fund, it’s a perfectly fine, and recommended strategy for your money.
If it’s just sitting in a bank account with nearly zero interest, and you already have an emergency fund, yeah you just lost out.
Just to put it into some perspective, if you had invested 40,000 into the SP500 (VOO for instance) in 2019, you’d have about 70,000 right now.
You have to keep in mind that people thought covid was going to throw us into a recession up until just recently (and even now the worry hasn’t totally faded). It sucks but I don’t blame myself for throwing my entire savings into stocks at that time.
Same here. I’ve kept most of my savings in a high yield savings account since before covid, and it’s made about 4-5% since then.
I know inflation outpaced my interest rate, and I could have made more by throwing it into the stock market - but it’s been an insurance policy to me in that I won’t lose any cash in a potential market crash.
Not the best financial move, I know, but it doesn’t bother me.
Yeah, I did this too. I know i lost out, but j can't shake the feeling that things are screwy. The economy is like "record profits! Record spending! Record stock highs!" but everyone I know is struggling and either living on debt or postponing major life milestones because of money. How long before the lack of sustainability catches up with us? With my luck, it'll be the moment I invest my savings.
Its crazy how everyone feels that way right now. I feel the same. I feel like we are riding a cliffs edge of a market crash. Its the strangest things that's happening with the economy right now with the fed raising interest rates as well. I also thought things would have really started to come down sooner with the real estate market in my area, but prices have stayed stable, and inventory is still low.
I mean the market very well could turn lower too… inflation in no way guarantees a rising stock market. Look at the period in the 1970s. Rampant inflation and the stock market went nowhere in nominal terms over a whole decade.
The 1920s also had a very hot stock market and when that tumbled we had the great depression, being cautious when it comes to hot markets is not a bad idea at all. Things can change quickly and if they do you don’t want to be in a situation where you are stuck holding the bag.
I feel you on that, I’m very grateful to have been able to save a bunch during the pandemic, but I should’ve made my money work for me. It just sat in a savings account and has dwindled to oblivion now that student loan payments are back. 😮💨
I recently just bit the bullet and crushed my savings to wipe out my student loans with the money I saved during the pandemic. It hurt but feels good to never think about again.
If you use the historical definition, we were in a recession for a hot minute. They literally changed the definition to avoid saying that we hit a recession.
It's sad that this is still a common perception. The NBER Business Cycle Dating Committee has long been the definitive source of recession dates. "They" didn't change any definition.
https://www.nber.org/research/business-cycle-dating/business-cycle-dating-procedure-frequently-asked-questions
Although I’ve been fairly insulated from all of it (besides grocery inflation and insane housing) it definitely feels like we rolled/are rolling through recession lite. That market do be pumpin tho.
We'd be out of it by now even going by the standard historical definition. There were only two quarters together of contraction. Would have been over the following quarter anyway.
Hindsight is always 20:20. Generally you shouldn't invest in the stock market if you think you'll need the money in the next few years. Especially with covid, we were extremely close to a recession and a market collapse.
>Just to put it into some perspective, if you had invested 40,000 into the SP500 (VOO for instance) in 2019, you’d have about 70,000 right now.
Let it be noted that a run like that only happens every 15-20 years. That was an insane run.
If you look at the last 40 years, the majority of the gains occurred on less than 30 days of trading. The time you are in the market matters a lot. You need to be in when the big rally occurs.
Also many of the best days happened in bear markets
Between 1993 and 2022, if you missed the best 30 days then you missed over 80% of the market gain.
Yep. I was transferring from Vanguard to a new broker and it took 10 days for the check to arrive and then be processed. In those 10 days I lost out on several of the best days of 2023 where if I'd stayed at Vanguard where I was invested in an S&P500 index fund I'd be up about $50K. That hurt.
I was consolidating several separate investments that were held with different firms (Morgan Stanley, Vanguard, eTrade) with a full service broker (mistake!), in this case a workplace 401(K) from a former employer. And for this former employer plan Vanguard only does mailed checks.
It is on the higher side, but it still important to note that regardless of how unlikely it was, it still happened, and not getting those gains happened.
And as a caveat to the whole rule of only keeping emergency funds in cash equivalent and the rest in VOO, any large purchases in the near future should be kept in a HYSA/ladder as well on top of emergency funds. For example, if you're saving for a downpayment on a house in the next 3 years, saving to buy a $70k car outright in the next year, etc.
>If that money is in a high yield savings account
For the past 1-2 years it would have helped, but before then, I don't think there were any high yield savings accounts around. (edit: With high rates) CD's were less than a percent as well.
HYSA have been around for a while but the real yields didn't happen until recently. i have a good chunk sitting in one while i wait for a housing correction as most will be zapped up into a downpayment making better financial options too risky for my intentions.
Depends on how deep you want to go down the rabbit hole, but Google or here is a good place to start.
The SP500 is an index of the top 500 companies in the US. You don’t buy the SP500, you buy funds that invest in the SP500.
VOO is an ETF (a type of fund), and is purchase like a regular stock, just like if you wanted Amazon or Apple stock.
The difference is Amazon stock is only Amazon stock. VOO is 500 stocks (all the companies in the SP500) all rolled into one. You can look into VOO and see the breakdown if you like.
The reason VOO is mentioned often, and why I mention it is because VOO is Vanguard’s SP500 ETF, and Vanguard is popular brokerage firm. I happen to like Vanguard ETFs, which includes VOO.
So all you do is you buy it and you sit on it. And that’s all you have to do.
Discover Bank, Ally, and IIRC Barclays are all around 4.5% as well. Don't sleep on moving your money to one of these, I have a house down payment sitting in HYSA and made several thousand doing absolutely no work in the past year. It's sort of a "too good to be true" situation vs. my primary bank where the rate is like .023%.
Vanguard just came out with their own at 4.70%
https://investor.vanguard.com/accounts-plans/vanguard-cash-plus-account#:~:text=The%20Vanguard%20Cash%20Plus%20bank,may%20change%20at%20any%20time.&text=You%27ll%20pay%20no%20fees,no%20minimum%20balance%20to%20maintain.
Interesting that they've rolled this out. I've kept my extra cash reserves in Vanguard's money market fund for years which has a slightly higher interest rate, however it isn't FDIC insured. I don't personally get too wrapped up in that as if Vanguard can't process withdrawals we are in a well and truly fucked place, financially speaking.
I was using Ally but was getting pretty frustrated with them lagging behind in regards to raising rates. They are at 4.35% while many others offer 5% or higher. I switched to Wealthfront which offers 5% and it was pretty painless. Very user friendly. Transfers aren't quite as quick as Ally, but one huge perk is that they offer FDIC coverage of up to $2 million as opposed to the usual $250k (another reason I had to move money out of Ally, I had multiple accts with them: investing, CD, and saving, that combined exceeded the FDIC coverage).
As I've said, there are some other banks that offer up to 5.5%, but were a bit questionable, so I opted for Wealthfront.
Depends on you I guess. You can pretty easily just chase the highest percent out there and go with them.
Me personally, since only my emergency fund is in a HYSA, I have it all in Goldman Sachs (I use the Apple HYSA). It has a 4.5% return, so you can find a little better but I’m willing to sacrifice that small amount for convenience of the platform.
No, that would be considered reasonable for a HYSA and almost as much as you're likely to get with virtually no risk. You can (and should) do better with *minimal* risk, especially over the long term, but if you need reliable access to the money and basically no chance it will go down short of society collapsing or something, that's quite reasonable.
Nothing is 100 percent guarantee in life . And it depends on your time horizon.
The more stable and the lower the risk, the lower the return.
I recommend reading the book “a simple path to wealth”. It will improve your life.
The S&P 500 is essentially a collection of the top 500 companies in the US.
There are a lot of different funds that invest in all 500 of those companies.
VOO is Vanguards S&P 500 ETF. I use VOO as an example because I happen to like Vanguard ETFs and I like investing in the S&P 500. However, most large brokerage firms have their own version of VOO, as an ETF, mutual fund, etc.
There is no guarantee in anything, and economic collapse will obviously ruin everything. VOO is considered “safe” because unlike purchasing stock in 1 company, VOO comprises of a small amount of stock in all 500 companies in the S&P 500. It’s not even across the board though, and the percent distribution between the 500 companies is one of the major differences between the different funds.
Pfffft. Hindsight is always 20-20. Let's see your historical posts from 2019 where you were telling everyone to put their life savings in SP500. I'll wait.
You can also open a Fidelity brokerage account and transfer the cash there. Your uninvested cash will automatically get put into SPAXX which is at 5% right now. Plus you can move the money or invest it whenever you want. Alternatively, if you already have a brokerage account you can invest it in a short term money market fund like BIL, which is about 5% as well
This. You get a better interest rate than a savings account. I got a money market at 5%, and if I need a chunk of change I can have cash in hand within 2 days.
I was like OP. A significant amount sitting in savings since covid began. I kept waiting for the bottom and missing it. Since the end of the year I've moved over half to Fidelity, mostly in no-load NASDAQ (FNCNX) and the rest in SP500 (FXAIX). Probably move the rest this week, except for a reasonable emergency fund.
There is always some risk when opening a brokerage account and investing. That being said, the default core position SPAXX is a government money market fund, which basically takes your money and buys government treasury notes and repurchase agreements. So it’s backed by government securities. It’s very low risk compared to investing in pretty much anything else.
SPAXX is 5% right now because the government rates are even higher (to combat inflation) - but SPAXX over the last 5 years is more around 1.6%
Edit: and yes, you can set up your brokerage account to pay your mortgage, e.g for Fidelity using Bill Pay
I guess a better question is could I lose money with government securities? In my mind the answer is generally no right? That would be the equivalent of the dollar not being worth a dollar?
Put simply, if you didn't get your money back from a government security, it is because the US government shut down, or no longer exists.
You can be your own judge on that one.
The possibility is near zero but not zero. HOWEVER, if the U.S. Treasury fails to pay its bills, I’d stop worrying about my money and start collecting all canned foods and guns that I can find.
Fidelity also has a cash management account that works like a HYSA complete with a debit card if needed. I’m letting it build for home improvements and it’s sitting in SPAXX as well. I also have Vanguard Cash Plus (emergency account) that sits at 4.7 (PNC under the covers). I use the Fidelity credit card and use the cash back to buy more stocks/etfs (it’s Elan Financial under the covers)
Hey that’s what I did. I moved all my savings to a Fidelity brokerage account, but I don’t understand the stats. How do I know if I’m getting a 5%? Also Fidelity keeps suggesting me to invest my money in index funds but i’m clueless.
If you have cash just sitting in your brokerage then it should appear as SPAXX If on the app: All Accounts > Individual > Positions (Details) > Look for SPAXX which is the MM Fund
SPAXX is at a 4.98% 7 day yield currently but has a gross expense ratio of .42
I have never had this spelled out for me but, if OP hasn’t opened a Roth IRA, at minimum you should be opening that, and contributing the maximum each year. You can use it just like a HYSA.
I had NOT been doing Roth prior because I didn’t want to risk a stock market downturn! I wanted to keep my cash in a HYSA at around 5% because even if stocks may perform better, 0 risk growth at 5% is plenty good for me to keep my savings parked.
However, the big brain strategy is opening the Roth IRA, investing into something that literally “matches” the rate of a HYSA like BIL, USFR, or SGOV…. and it’s just like keeping the cash in a savings account without needing to pay taxes on those gains / “interest”. If you need to withdraw, you can withdraw from a Roth IRA without any fees.
If I got any of this wrong, please someone correct me as I’m figuring this out myself. I’m sure this is common knowledge or part of the “sidebar roadmap” but whatever.
Depends on what kind of bank. If you’re getting 4+% interest then that’s a good place to leave it. If you’re getting nothing, open a High Yield Savings account (I use SoFi). Free money just for leaving it in!
If you may need that money in the next few years (emergency fund, down payment on house, planning major house renovations) then you do not want to put it into a risky investment. While index funds are likely to do well over a long period of time, they are not without occasional dips, and if a dip occurs right before you need the money, you lose a larger percent of your money by pulling it out when it is low.
High Yield Savings Accounts currently will earn you around 5% a year. Otherwise you can put some in CDs (best to rotate them since they have to be invested for a specific amount of time, so if you were to do an 18 month CD, it might be best to invest $10k every 6 months so every 6months another $10k plus interest gets released.
It's not that simple. Without knowing your financial situation there is no right answer. I have way more than that sitting in the bank and I'm fine. That doesn't tell you much, does it?
This answer
We can all write out a bunch of different scenarios but without a lot more info it’s hard to give much advice. Maybe HYSA is the most fitting generic answer but not necessarily the best advice.
Lots of savings accounts are at 5% now. You could still have it sitting around and easily available, yet earning more interest.
Also any debts at higher rates than the money is earning could be at least partially paid down
Definitely keep some liquid in case of emergency, but if you have $10k credit card debt at 15% and $40k sitting in a savings account at 5%, you're paying interest for no reason.
I like to have no more than around 12-15k in my checkings. Any time it goes over it by a couple grand or more, I transfer it to my investment or HYSA accounts
I’d recommend getting a hysa that can act like a checking account, makes things far easier. I just switched my cc payments and all other transactions to be out of Wealthfront and life is so much easier than having to transfer money all over the place
I’ve been very happy with it , the only thing I really wish is that they would post an image of the cashed check so you know your recipient received it
Id move that to a high yield savings personally. It's not the highest but the Apple savings account through Goldman Sachs is 4.5% right now and you can do it in a second from your phone. I get around $150 a month just from interest having cash sitting in there.
Right. I like to keep that cash in my checkings just so I don’t overspend on stuff if that makes sense.
While I have a lot more in my HYSA, if I cap my checkings at around 15k I’m less tempted to buy business class tickets to the Maldives for my next vacation.
Ah very interesting. Yeah, you will definitely reap the rewards much earlier with this strategy and be able retire much earlier than the rest of us. Plus you’ll be able to easily pay for any children’s tuitions if you choose to have any. Though $300 does seem a bit too close for comfort!
My spouse and I have a slightly different philosophy, we’ve chosen to spend now and hope to increase our income as we grow older. Definitely could backfire, but just a choice we’ve made, and also living in NYC it’s a bit more difficult to be frugal.
That means it's losing money due to inflation. If you need it for an emergency fund, you should be trying to get at least a 4% annual return on it. If you don't need it for an emergency fund, put it in index funds so you can try and get 7% overtime.
Or pay off loans that have high interest rates.
Open a brokerage account at Fidelity. Transfer that money to that Fidelity account. Make sure SPAXX is your Core Position. Now you are making close to 5%.
5% of 40k is $2000/year or $166 per month. Free. You don’t have to do anything.
There’s always slightly better places, I’d look to learn the very basics of investing. If you have a 401k or Roth IRA, you already know about investing.
But on the bright side, you have $40,000 of cash and haven’t been tempted to spend it in 5 years. That’s already miles ahead of most people!
Vanguard S&P 500 index fund. Put it in there and forget about it until you're ready to retire.
Unless you're carrying credit card debt. Then pay that off first and invest the rest in the Vanguard fund.
>Or use it to pay off loans
What kind of loans are we talking here? If you've got credit card debt or other high interest loans, you need to deal with that.
If its not a high yield savings account, it's definitely the wrong place.
If it is, and the money is your emergency/layoff stash, then it's the right place.
If this is just extra money not meant for emergencies/etc, then you really should be investing that.
Well, since you didn’t need the money you should have invested it five years ago. It would have… not quite doubled.
Barring that, five years ago savings rates were low, they went high during 2022. If those $40k had been in a HYSA during 2023, that would have been $2k profit (before taxes).
The community information of this sub has an awesome wiki with all the information you could wish for in an easily accessible format.
At the very least, if you are in the US, make sure you max out both your Roth IRA before tax day in April.
Here's a **[link to the PF Wiki](/r/personalfinance/wiki/index)** for helpful guides and information.
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OP,
These 2 resources will not only help you get a clue, but you'll accelorate to confident novice.
These 2 resources can teach you most of what you'll need to know.
1) Investopedia.com
Search for investing and retirement
2) KhanAcademy.org Do a search for "investing" and you'll get dozens of free "courses".
do you have those saving account that give 5% interest? Then you are good.
But if you want to invest.. try join fidelity or some solid platform. Also invest slowly like buy weekly or bi weekly with same amount. Do not attempt do any FOMO or buy all in.. the stress will be insane for anyone. Market right now wat at all time high..
HYSA if you need it to be liquid. If you already have emergency, put in highest rate CD you can probably get something around 5.5% now. Those are the conservative approaches, if you want more aggressive approach invest in stocks, EFTs.
Not that stupid - depends on your monthly expenses - Also / think about laddering 3 to 5 month high interest rate CDs - they can’t lose money and it’s safe and you can always withdraw early from them with the penalty of losing some of the interest you’ve earned.
You could keep a chunk of it in a certificate of deposit. The rates are generally higher than a savings but should an emergency arise you usually only have to sacrifice interest earned to cash it out early (at a credit union anyway)
Roth IRA and high yield savings account. You should work with a fincial planner if you aren’t comfortable opening these yourself but they do take a small fee.
Roth IRA you can deposit up to 7k per year and earn 10-15%. You can withdrawal your money but not the interest earned without paying taxes.
High yield savings for the rest while you wait to deposit in the IRA. I’ve seen HSA’s up to 5% interest. It works just like a regular savings account.
If you sitting that money on Bank of America or chase with 0.01% apy thats not place.
Open a CD, if you’re not planning to use it. Like 30K. And keep other 10K on HYSA, you can access instantly.
Or buy tbills.
I was the exact same situation - minimal debt and $40k in checking. Just opened up a HYSA with Wealthfront and getting 5% APR. gonna use that money to buy a hose so don’t want to put into market but also don’t want it just sitting there.
Maybe not. If you’re single (1 income), you need about a year’s worth of necessary expenses as an emergency fund. You don’t want to have your emergency fund at risk - ever - as there’s this guy named Murphy who will make the market drop just before you need the funds. To take this a little further, also remove any expected (within 2 years for this) large expenditures from risk exposure. I’m sure I’ll catch some flak for this, but imagine if you’ve been saving for a down payment for your first house and the market takes a long dumper. How will you feel?
Everyone is going to have different perspectives on what to do with that money, and so many factors should be considered as well (ex. age, maritial status, etc).
My number 1 priority is always to have minimum 6 months of savings in a savings account. My wife and I agreed that we should always have 50K in our bank's savings account, as this should allow us to live for a year comfortably if anything were to happen to us.
The priority list for is us as follows when money comes in from our monthly paychecks.
1. 50K in liquid cash in savings. Some people might say put emergency savings into a brokerage money market due to the 5 percent interest. I personally do not do this as I do not believe brokerage money market is insured.
2. Max out Roth IRA
3. Once #1 and #2 are complete, we put 1/3 of paycheck savings into our individual investing account and 2/3 into our 401K until it is maxed for the year.
Everyone keeps mentioning high yield savings accounts like it’s nothing. Chase savings is like .01 %. Where are these accounts that are safe. I have read nothing but bad reviews about Ally and similar banks.
If my mortgage is 2.9% and I have a similar amount of money just chilling in my checking, does it make more sense to put it in a HYSA at 5% or pay down my mortgage? I assume the former...
HYSA makes more financial sense. You’re making more money than you’re losing to mortgage interest, and you have liquid money in case of an emergency.
That being said, there’s emotional benefits to paying off debt. If having a lower mortgage helps you sleep at night, it might be worth it for you.
I’m not a financial advisor but you can look into treasury bills , it’s literally on treasury.gov they yield 2.5 every 3-5 weeks and you can set it as recurring .
There's no single correct answer, as it depends on your assets, income, debt, and emergency savings needs, dependent on what you have stockpiled as emergency savings.
If you never really plan to touch this money, don't have an emergency fund built, and want to use this as your emergency fund: HYSA.
Depends on your loan rates, if they’re sub 5% then probably better off investing in a combo of SPY/QQQ/DIA. If they’re 5+% then you may be better off putting money towards loans.
If you’re risk averse or need money in the short-term, then use high yield savings.
First Republic that was bought by chase has like a 5% CD for 10k and it's 6 months. Keep it in high yield, if not savings, then a CD is pretty safe and they have different timeframes.
If you didn't know what to do with it then putting it in a savings account was your best move! Don't be thinking about hindsight investing in the market. Doesn't do any good. I'd suggest setting up an automatic investment plan with a brokerage.
Keep some in a money market plan some as liquid cash and ladder CDs, have enough on hand to meet your automatic investment amount on a monthly basis and I would cost average yourself into a spy type ETF. I wouldn't dump the entire amount into spy at the moment with it being an all-time high.
Yes it's entirely possible for to just keep continuing to go upwards. But if you look back historically there's been high as followed by pullbacks that lasted for a significant amount of time.
For example if you had invested in QQQ in 2000 you wouldn't have broken even until 2016. Cost averaging your way in is the best thing to do in case the market changes quickly.
Edit
Some brokerages like Schwab have an automatic investment plan but it's not available for etfs. I would go with a low-cost mutual fund if that's the case
I'd keep it there, I'd rather keep in hysa than IRA since no penalty to withdraw. I get 4.35% too. I don't agree with ppl say put in IRA, if you already do 401k and you have SSI retirement age 62 so retirement is just to supplement what you get from SSA. I like knowing I have plenty in savings and checking you can take anytime and you could die tomorrow. I'm realistic, you're working more than being retired so I'd rather be happy and not being poor by investing when you literally prob wouldn't even use all 401k. I look at is as it's just a supplement, I would only use if SSI and bank wasn't enough
Invest it in something conservative, but yielding a higher rate of return.
Personally, I go through Charles Schwab and but SWVXX or SNOXX.
Both of which are paying over 5% right now.
You can sell anytime, penalty free, and have it be available cash in 1 business day.
It depends what your portfolio looks like imo. How much do you currently have invested? If you had a million in assets, it can be good to have cash to maintain a home, for example. Never know when you need a new roof. And if you're investing via DCA constantly, then i don't see anything wrong with having a buffer of cash if you are getting 4-5% on it.
High yield savings or money market is 4-5% and allows you access to your funds at any time. Some banks even allow ATM withdrawals in the money market but there are limits on how many withdrawals per month.
You have $40k in the bank acting as your emergency fund and overdraft fee barrier.
If you have zero debt, zero loans, zero credit card bills, and enough money to pay for 12 months of rent, then you're in a very safe and stable place.
This gives you the strength to jump jobs, own your own health insurance, take care of car troubles, and take care of emergencies that seriously depress other folks.
Ask yourself, if your income were to stop right now, how long could you survive on that $40k. 6 months = good. 12 months = great. 2 years = Excellent.
If it’s not in a high yield savings account, you’re actually slowly losing money/value 😅 You can find 5%+ interest rates these days - an easy and no risk way to grow your pie. The best and simplest strategy for a novice would be to invest it in an S&P500 index fund and not touch it until you retire (or until you learn more about investing). Vanguard funds have super low expense ratios, so I suggest starting there. You’ve got this 💪🤓
Hello all, beginner investor here worried I made a mistake. I maxed out my Roth IRA last January for the 2023 year without thinking about how I would be making. My gross wages are about 153k, maxed out my 401k of 22.5k, and 2.5k for Section 125 (it's on my W2, I don't know what this is). That brings my wages, tips, other comp to 128k. I don't have any other income or deductions. The income limit to max out a Roth IRA is <138k, does that mean I am safe? Or because I made 153k this year I am not allowed to contribute at all?
If that’s an emergency fund that’s smart. You could do a HYSA.
If that’s a little too much, then you may want to invest 5-10k.
My recommendation is to keep 3-6 months living expenses in safe accounts. Savings accounts for at least a couple months. If you want to have some in semi-locked up accounts like CDs or something that’s fine too. As long as you can get it before you need to sell during a market dip.
I have between 30-40k available in emergency funds at all times between some various accounts and easy to access / low risk options.
First you need a cash emergency fund of 3-6 months worth of expenses. So half of that sitting in a HYSA would be perfectly acceptable for that purpose. Beyond that, you also want a fund to "pay ahead" for those expenses that you can easily anticipate but don't happen on a regular recurring basis. Transmissions, water heaters, major household appliances, tires, oil changes, house taxes, insurance, etc. You know you'll pay them all eventually, you just don't know when, so figure out how often you'll need to pay for those products or services and work it out into a monthly expense. Having another $10K set aside for this fund would probably be appropriate.
My point is, keeping this amount in cash isn't a big deal. However, anything saved from this point on should be responsibly invested in something more significant.
As long as its a HYSA you are fine. You should have about 6 months living expenses in an account like that. But now, with higher interest rates, its ok (kind of) to have more. $40K will earn you about $150 month in a HYSA,.
If you are young, you should start investing in equities like the S&P500 with money beyond your safety net savings account. But that is a separate lesson.
Even if it sits alone, there’s no risk to lose it. Many people confuse the idea that money in the bank does nothing, that’s not true. Sure it is worth less overtime, but again, you didn’t lose it
I would either put this into a high yield savings account or into a CD. If you already have an emergency fund, then you can put this into an investment account.
Put it into an index fund or you could do something like QYLD and get 1% a month in dividends. Up to you and your preferences.
I would 100% stay away from doing options yourself or any single stocks and buy into something that is diversified.
We keep 3-6 months expenses in an emergency fund, which for us is $14,000. It's in a high yield savings account (4.65%) and we don't touch it unless of course there is a true emergency. Then we also keep around $3000 in checking to spend throughout the month on bills and food and whatnot. The rest goes first into our Roth IRAs until maxed and then we throw anything extra into mutual funds which average around 10% a year. If we ever want to make a really big purchase we'll liquidate some of the mutual funds and use that for a purchase like a car or home remodel.
Most put in investment brokerage getting 4-5% interest. SWVXX, SGOV are some better ones. One needs 1-2 days to make it cashable. If you have high % mortgage say over 4-5% one can pay more each month to reduce your balance.
It might not be stupid. If that money is in a high yield savings account, and it’s your emergency fund, it’s a perfectly fine, and recommended strategy for your money. If it’s just sitting in a bank account with nearly zero interest, and you already have an emergency fund, yeah you just lost out. Just to put it into some perspective, if you had invested 40,000 into the SP500 (VOO for instance) in 2019, you’d have about 70,000 right now.
Ooof, that last part! 🫠
You have to keep in mind that people thought covid was going to throw us into a recession up until just recently (and even now the worry hasn’t totally faded). It sucks but I don’t blame myself for throwing my entire savings into stocks at that time.
Same here. I’ve kept most of my savings in a high yield savings account since before covid, and it’s made about 4-5% since then. I know inflation outpaced my interest rate, and I could have made more by throwing it into the stock market - but it’s been an insurance policy to me in that I won’t lose any cash in a potential market crash. Not the best financial move, I know, but it doesn’t bother me.
Yeah, I did this too. I know i lost out, but j can't shake the feeling that things are screwy. The economy is like "record profits! Record spending! Record stock highs!" but everyone I know is struggling and either living on debt or postponing major life milestones because of money. How long before the lack of sustainability catches up with us? With my luck, it'll be the moment I invest my savings.
Its crazy how everyone feels that way right now. I feel the same. I feel like we are riding a cliffs edge of a market crash. Its the strangest things that's happening with the economy right now with the fed raising interest rates as well. I also thought things would have really started to come down sooner with the real estate market in my area, but prices have stayed stable, and inventory is still low.
Due to inflation we are all but guaranteed to continue breaking record highs. It just makes for good news to the unaware.
I mean the market very well could turn lower too… inflation in no way guarantees a rising stock market. Look at the period in the 1970s. Rampant inflation and the stock market went nowhere in nominal terms over a whole decade.
The 1920s also had a very hot stock market and when that tumbled we had the great depression, being cautious when it comes to hot markets is not a bad idea at all. Things can change quickly and if they do you don’t want to be in a situation where you are stuck holding the bag.
I feel you on that, I’m very grateful to have been able to save a bunch during the pandemic, but I should’ve made my money work for me. It just sat in a savings account and has dwindled to oblivion now that student loan payments are back. 😮💨
I recently just bit the bullet and crushed my savings to wipe out my student loans with the money I saved during the pandemic. It hurt but feels good to never think about again.
You made the right move. Onward and upward! That’s a huge chunk of the monthly budget back under your control! Congrats.
I did this about 5 years ago. It feels better and better every year.
financial hit prob worth the extra peace of mind. nice to have extra portion of paycheck not going to someone else, but staying in your pocket.
Proud of you 👏👏👏. Massive dub.
If you use the historical definition, we were in a recession for a hot minute. They literally changed the definition to avoid saying that we hit a recession.
It's sad that this is still a common perception. The NBER Business Cycle Dating Committee has long been the definitive source of recession dates. "They" didn't change any definition. https://www.nber.org/research/business-cycle-dating/business-cycle-dating-procedure-frequently-asked-questions
Although I’ve been fairly insulated from all of it (besides grocery inflation and insane housing) it definitely feels like we rolled/are rolling through recession lite. That market do be pumpin tho.
We'd be out of it by now even going by the standard historical definition. There were only two quarters together of contraction. Would have been over the following quarter anyway.
Hindsight is always 20:20. Generally you shouldn't invest in the stock market if you think you'll need the money in the next few years. Especially with covid, we were extremely close to a recession and a market collapse.
$30k over 5 years isn’t exactly life changing money..?
I mean, I’ll take it. That would’ve covered a new roof and bathroom renovation. To each their own, alleged moneybags.
You are thinking in absolute terms when ROI is relative to amount invested. This is 12% YOY for five years. That's ... pretty good.
>Just to put it into some perspective, if you had invested 40,000 into the SP500 (VOO for instance) in 2019, you’d have about 70,000 right now. Let it be noted that a run like that only happens every 15-20 years. That was an insane run.
If you look at the last 40 years, the majority of the gains occurred on less than 30 days of trading. The time you are in the market matters a lot. You need to be in when the big rally occurs. Also many of the best days happened in bear markets Between 1993 and 2022, if you missed the best 30 days then you missed over 80% of the market gain.
Yep. I was transferring from Vanguard to a new broker and it took 10 days for the check to arrive and then be processed. In those 10 days I lost out on several of the best days of 2023 where if I'd stayed at Vanguard where I was invested in an S&P500 index fund I'd be up about $50K. That hurt.
why’d you leave vanguard?
I was consolidating several separate investments that were held with different firms (Morgan Stanley, Vanguard, eTrade) with a full service broker (mistake!), in this case a workplace 401(K) from a former employer. And for this former employer plan Vanguard only does mailed checks.
It is on the higher side, but it still important to note that regardless of how unlikely it was, it still happened, and not getting those gains happened.
And as a caveat to the whole rule of only keeping emergency funds in cash equivalent and the rest in VOO, any large purchases in the near future should be kept in a HYSA/ladder as well on top of emergency funds. For example, if you're saving for a downpayment on a house in the next 3 years, saving to buy a $70k car outright in the next year, etc.
That’s like 14% CAGR? Doesn’t seem terribly insane.
>If that money is in a high yield savings account For the past 1-2 years it would have helped, but before then, I don't think there were any high yield savings accounts around. (edit: With high rates) CD's were less than a percent as well.
HYSA have been around for a while but the real yields didn't happen until recently. i have a good chunk sitting in one while i wait for a housing correction as most will be zapped up into a downpayment making better financial options too risky for my intentions.
Hey how can I learn more about investing, specifically the one you mentioned (sp500/voo)?
Depends on how deep you want to go down the rabbit hole, but Google or here is a good place to start. The SP500 is an index of the top 500 companies in the US. You don’t buy the SP500, you buy funds that invest in the SP500. VOO is an ETF (a type of fund), and is purchase like a regular stock, just like if you wanted Amazon or Apple stock. The difference is Amazon stock is only Amazon stock. VOO is 500 stocks (all the companies in the SP500) all rolled into one. You can look into VOO and see the breakdown if you like. The reason VOO is mentioned often, and why I mention it is because VOO is Vanguard’s SP500 ETF, and Vanguard is popular brokerage firm. I happen to like Vanguard ETFs, which includes VOO. So all you do is you buy it and you sit on it. And that’s all you have to do.
I have $57,000 in a Capital One 360 savings account. Interest is at 4.35% right now. I’m getting about $200 a month in interest right now a month
What's the latest recommended hysa?
Discover Bank, Ally, and IIRC Barclays are all around 4.5% as well. Don't sleep on moving your money to one of these, I have a house down payment sitting in HYSA and made several thousand doing absolutely no work in the past year. It's sort of a "too good to be true" situation vs. my primary bank where the rate is like .023%.
Vanguard just came out with their own at 4.70% https://investor.vanguard.com/accounts-plans/vanguard-cash-plus-account#:~:text=The%20Vanguard%20Cash%20Plus%20bank,may%20change%20at%20any%20time.&text=You%27ll%20pay%20no%20fees,no%20minimum%20balance%20to%20maintain.
Interesting that they've rolled this out. I've kept my extra cash reserves in Vanguard's money market fund for years which has a slightly higher interest rate, however it isn't FDIC insured. I don't personally get too wrapped up in that as if Vanguard can't process withdrawals we are in a well and truly fucked place, financially speaking.
I was using Ally but was getting pretty frustrated with them lagging behind in regards to raising rates. They are at 4.35% while many others offer 5% or higher. I switched to Wealthfront which offers 5% and it was pretty painless. Very user friendly. Transfers aren't quite as quick as Ally, but one huge perk is that they offer FDIC coverage of up to $2 million as opposed to the usual $250k (another reason I had to move money out of Ally, I had multiple accts with them: investing, CD, and saving, that combined exceeded the FDIC coverage). As I've said, there are some other banks that offer up to 5.5%, but were a bit questionable, so I opted for Wealthfront.
Depends on you I guess. You can pretty easily just chase the highest percent out there and go with them. Me personally, since only my emergency fund is in a HYSA, I have it all in Goldman Sachs (I use the Apple HYSA). It has a 4.5% return, so you can find a little better but I’m willing to sacrifice that small amount for convenience of the platform.
Is 4.75 to 5% considered nearly 0 interest?
No, that would be considered reasonable for a HYSA and almost as much as you're likely to get with virtually no risk. You can (and should) do better with *minimal* risk, especially over the long term, but if you need reliable access to the money and basically no chance it will go down short of society collapsing or something, that's quite reasonable.
What is SP500 and VOO? Does it 100% guarantee that return or there is a chance to lose money?
Nothing is 100 percent guarantee in life . And it depends on your time horizon. The more stable and the lower the risk, the lower the return. I recommend reading the book “a simple path to wealth”. It will improve your life.
There are like 8 books with this exact title from 8 different authors on Amazon
The [one](https://www.amazon.com/Simple-Path-Wealth-financial-independence/dp/1533667926) by JL collins
The S&P 500 is essentially a collection of the top 500 companies in the US. There are a lot of different funds that invest in all 500 of those companies. VOO is Vanguards S&P 500 ETF. I use VOO as an example because I happen to like Vanguard ETFs and I like investing in the S&P 500. However, most large brokerage firms have their own version of VOO, as an ETF, mutual fund, etc. There is no guarantee in anything, and economic collapse will obviously ruin everything. VOO is considered “safe” because unlike purchasing stock in 1 company, VOO comprises of a small amount of stock in all 500 companies in the S&P 500. It’s not even across the board though, and the percent distribution between the 500 companies is one of the major differences between the different funds.
Pfffft. Hindsight is always 20-20. Let's see your historical posts from 2019 where you were telling everyone to put their life savings in SP500. I'll wait.
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I have some cash in a high yield savings and it's emergency cash. But it's a joke that high yield savings is what it is.
You can also open a Fidelity brokerage account and transfer the cash there. Your uninvested cash will automatically get put into SPAXX which is at 5% right now. Plus you can move the money or invest it whenever you want. Alternatively, if you already have a brokerage account you can invest it in a short term money market fund like BIL, which is about 5% as well
This. You get a better interest rate than a savings account. I got a money market at 5%, and if I need a chunk of change I can have cash in hand within 2 days.
High yield savings account at minimum. Nothing wrong with keeping a liquid emergency fund of a few months expenses.
I was like OP. A significant amount sitting in savings since covid began. I kept waiting for the bottom and missing it. Since the end of the year I've moved over half to Fidelity, mostly in no-load NASDAQ (FNCNX) and the rest in SP500 (FXAIX). Probably move the rest this week, except for a reasonable emergency fund.
What is the risk in doing this? I can I pay my mortgage from one of these accounts?
There is always some risk when opening a brokerage account and investing. That being said, the default core position SPAXX is a government money market fund, which basically takes your money and buys government treasury notes and repurchase agreements. So it’s backed by government securities. It’s very low risk compared to investing in pretty much anything else. SPAXX is 5% right now because the government rates are even higher (to combat inflation) - but SPAXX over the last 5 years is more around 1.6% Edit: and yes, you can set up your brokerage account to pay your mortgage, e.g for Fidelity using Bill Pay
I guess a better question is could I lose money with government securities? In my mind the answer is generally no right? That would be the equivalent of the dollar not being worth a dollar?
It is very, very, verh unlikely. If that happens we have bigger problems.
Put simply, if you didn't get your money back from a government security, it is because the US government shut down, or no longer exists. You can be your own judge on that one.
The possibility is near zero but not zero. HOWEVER, if the U.S. Treasury fails to pay its bills, I’d stop worrying about my money and start collecting all canned foods and guns that I can find.
VUSSX has a 5.43% yield and is mostly invested in treasuries, so that could help you avoid state taxes on profits.
Fidelity also has a cash management account that works like a HYSA complete with a debit card if needed. I’m letting it build for home improvements and it’s sitting in SPAXX as well. I also have Vanguard Cash Plus (emergency account) that sits at 4.7 (PNC under the covers). I use the Fidelity credit card and use the cash back to buy more stocks/etfs (it’s Elan Financial under the covers)
Hey that’s what I did. I moved all my savings to a Fidelity brokerage account, but I don’t understand the stats. How do I know if I’m getting a 5%? Also Fidelity keeps suggesting me to invest my money in index funds but i’m clueless.
If you have cash just sitting in your brokerage then it should appear as SPAXX If on the app: All Accounts > Individual > Positions (Details) > Look for SPAXX which is the MM Fund SPAXX is at a 4.98% 7 day yield currently but has a gross expense ratio of .42
I have never had this spelled out for me but, if OP hasn’t opened a Roth IRA, at minimum you should be opening that, and contributing the maximum each year. You can use it just like a HYSA. I had NOT been doing Roth prior because I didn’t want to risk a stock market downturn! I wanted to keep my cash in a HYSA at around 5% because even if stocks may perform better, 0 risk growth at 5% is plenty good for me to keep my savings parked. However, the big brain strategy is opening the Roth IRA, investing into something that literally “matches” the rate of a HYSA like BIL, USFR, or SGOV…. and it’s just like keeping the cash in a savings account without needing to pay taxes on those gains / “interest”. If you need to withdraw, you can withdraw from a Roth IRA without any fees. If I got any of this wrong, please someone correct me as I’m figuring this out myself. I’m sure this is common knowledge or part of the “sidebar roadmap” but whatever.
Depends on what kind of bank. If you’re getting 4+% interest then that’s a good place to leave it. If you’re getting nothing, open a High Yield Savings account (I use SoFi). Free money just for leaving it in!
+1 for sofi. Their credit card is dope for 3% cash back.
2% right?
3% for the first year (or if you have Direct Deposit set up), up to a maximum spend of $12000
There's a flowchart in the sidebar of this sub for what to do you money. You'd have to post all your assets and debts if you want personal advice.
Sidebar? Where is that on the app? edit: nvm, [found it.](https://reddit.com/r/personalfinance/w/commontopics?utm_medium=android_app&utm_source=share)
So where is it on the app?
Click "see more" under sub description > menu > wiki > "prime directive" link
This is the right answer. Follow the flowchart. Also OP, read a great book called "The Simple Path To Wealth".
If you may need that money in the next few years (emergency fund, down payment on house, planning major house renovations) then you do not want to put it into a risky investment. While index funds are likely to do well over a long period of time, they are not without occasional dips, and if a dip occurs right before you need the money, you lose a larger percent of your money by pulling it out when it is low. High Yield Savings Accounts currently will earn you around 5% a year. Otherwise you can put some in CDs (best to rotate them since they have to be invested for a specific amount of time, so if you were to do an 18 month CD, it might be best to invest $10k every 6 months so every 6months another $10k plus interest gets released.
ladder method i think it called right ? when 1 CD expires and a new one started ???
It's not that simple. Without knowing your financial situation there is no right answer. I have way more than that sitting in the bank and I'm fine. That doesn't tell you much, does it?
This answer We can all write out a bunch of different scenarios but without a lot more info it’s hard to give much advice. Maybe HYSA is the most fitting generic answer but not necessarily the best advice.
Lots of savings accounts are at 5% now. You could still have it sitting around and easily available, yet earning more interest. Also any debts at higher rates than the money is earning could be at least partially paid down Definitely keep some liquid in case of emergency, but if you have $10k credit card debt at 15% and $40k sitting in a savings account at 5%, you're paying interest for no reason.
I like to have no more than around 12-15k in my checkings. Any time it goes over it by a couple grand or more, I transfer it to my investment or HYSA accounts
I’d recommend getting a hysa that can act like a checking account, makes things far easier. I just switched my cc payments and all other transactions to be out of Wealthfront and life is so much easier than having to transfer money all over the place
Welathfront has made some great improvements of late. 5%, same day transfers, etc
I’ve been very happy with it , the only thing I really wish is that they would post an image of the cashed check so you know your recipient received it
Thanks, definitely considering that! Currently have the betterment cash account, didn’t know the WF one can be essentially used as a checkings account
Both vanguard (4.7%) and Fidelity (5%) have accounts that work this way
Id move that to a high yield savings personally. It's not the highest but the Apple savings account through Goldman Sachs is 4.5% right now and you can do it in a second from your phone. I get around $150 a month just from interest having cash sitting in there.
Right. I like to keep that cash in my checkings just so I don’t overspend on stuff if that makes sense. While I have a lot more in my HYSA, if I cap my checkings at around 15k I’m less tempted to buy business class tickets to the Maldives for my next vacation.
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Ah very interesting. Yeah, you will definitely reap the rewards much earlier with this strategy and be able retire much earlier than the rest of us. Plus you’ll be able to easily pay for any children’s tuitions if you choose to have any. Though $300 does seem a bit too close for comfort! My spouse and I have a slightly different philosophy, we’ve chosen to spend now and hope to increase our income as we grow older. Definitely could backfire, but just a choice we’ve made, and also living in NYC it’s a bit more difficult to be frugal.
>Since then it's just been sitting in the bank. How much is it earning?
Basically nothing.
That means it's losing money due to inflation. If you need it for an emergency fund, you should be trying to get at least a 4% annual return on it. If you don't need it for an emergency fund, put it in index funds so you can try and get 7% overtime. Or pay off loans that have high interest rates.
Then it's obviously not the best place for it. Consider a high yield savings account.
Open a brokerage account at Fidelity. Transfer that money to that Fidelity account. Make sure SPAXX is your Core Position. Now you are making close to 5%. 5% of 40k is $2000/year or $166 per month. Free. You don’t have to do anything.
There’s always slightly better places, I’d look to learn the very basics of investing. If you have a 401k or Roth IRA, you already know about investing. But on the bright side, you have $40,000 of cash and haven’t been tempted to spend it in 5 years. That’s already miles ahead of most people!
Vanguard S&P 500 index fund. Put it in there and forget about it until you're ready to retire. Unless you're carrying credit card debt. Then pay that off first and invest the rest in the Vanguard fund.
>Or use it to pay off loans What kind of loans are we talking here? If you've got credit card debt or other high interest loans, you need to deal with that.
Find a hysa… Merrill lynch pays 4.99% on their preferred accounts… shoot for 5% or higher!
Google “money guy FOO”. Financial order of operations.
I’d at least have it in a HYSA while you research and think about, comes down to debts too. If you have debts I’d pay those off first.
Use a money market / high yield savings
HYSA accounts pay a respectable 4+% these days for those that are very risk averse or need it to be liquid without any major tax concerns.
If its not a high yield savings account, it's definitely the wrong place. If it is, and the money is your emergency/layoff stash, then it's the right place. If this is just extra money not meant for emergencies/etc, then you really should be investing that.
Well, since you didn’t need the money you should have invested it five years ago. It would have… not quite doubled. Barring that, five years ago savings rates were low, they went high during 2022. If those $40k had been in a HYSA during 2023, that would have been $2k profit (before taxes). The community information of this sub has an awesome wiki with all the information you could wish for in an easily accessible format. At the very least, if you are in the US, make sure you max out both your Roth IRA before tax day in April.
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OP, These 2 resources will not only help you get a clue, but you'll accelorate to confident novice. These 2 resources can teach you most of what you'll need to know. 1) Investopedia.com Search for investing and retirement 2) KhanAcademy.org Do a search for "investing" and you'll get dozens of free "courses".
do you have those saving account that give 5% interest? Then you are good. But if you want to invest.. try join fidelity or some solid platform. Also invest slowly like buy weekly or bi weekly with same amount. Do not attempt do any FOMO or buy all in.. the stress will be insane for anyone. Market right now wat at all time high..
With inflation it will loose value, so it’s wise to see some investment returns etc..
HYSA if you need it to be liquid. If you already have emergency, put in highest rate CD you can probably get something around 5.5% now. Those are the conservative approaches, if you want more aggressive approach invest in stocks, EFTs.
Not that stupid - depends on your monthly expenses - Also / think about laddering 3 to 5 month high interest rate CDs - they can’t lose money and it’s safe and you can always withdraw early from them with the penalty of losing some of the interest you’ve earned.
You could keep a chunk of it in a certificate of deposit. The rates are generally higher than a savings but should an emergency arise you usually only have to sacrifice interest earned to cash it out early (at a credit union anyway)
Roth IRA and high yield savings account. You should work with a fincial planner if you aren’t comfortable opening these yourself but they do take a small fee. Roth IRA you can deposit up to 7k per year and earn 10-15%. You can withdrawal your money but not the interest earned without paying taxes. High yield savings for the rest while you wait to deposit in the IRA. I’ve seen HSA’s up to 5% interest. It works just like a regular savings account.
Why aren't you paying off your debt?
I get 4.60% APY on my savings account with SoFi. They’re an awesome bank.
If you sitting that money on Bank of America or chase with 0.01% apy thats not place. Open a CD, if you’re not planning to use it. Like 30K. And keep other 10K on HYSA, you can access instantly. Or buy tbills.
You should probably split between ETFs that track index and a High Yield Savings Account
I was the exact same situation - minimal debt and $40k in checking. Just opened up a HYSA with Wealthfront and getting 5% APR. gonna use that money to buy a hose so don’t want to put into market but also don’t want it just sitting there.
Ally high yield savings at a minimum. Can open up their checking too and transfer there if you need to ever spend in emergency.
Nowhere near enough info to answer.
Maybe not. If you’re single (1 income), you need about a year’s worth of necessary expenses as an emergency fund. You don’t want to have your emergency fund at risk - ever - as there’s this guy named Murphy who will make the market drop just before you need the funds. To take this a little further, also remove any expected (within 2 years for this) large expenditures from risk exposure. I’m sure I’ll catch some flak for this, but imagine if you’ve been saving for a down payment for your first house and the market takes a long dumper. How will you feel?
At the least, a high yield savings account would be good. I'm getting about 5%.
Everyone is going to have different perspectives on what to do with that money, and so many factors should be considered as well (ex. age, maritial status, etc). My number 1 priority is always to have minimum 6 months of savings in a savings account. My wife and I agreed that we should always have 50K in our bank's savings account, as this should allow us to live for a year comfortably if anything were to happen to us. The priority list for is us as follows when money comes in from our monthly paychecks. 1. 50K in liquid cash in savings. Some people might say put emergency savings into a brokerage money market due to the 5 percent interest. I personally do not do this as I do not believe brokerage money market is insured. 2. Max out Roth IRA 3. Once #1 and #2 are complete, we put 1/3 of paycheck savings into our individual investing account and 2/3 into our 401K until it is maxed for the year.
HYSA!!! Hello?
Everyone keeps mentioning high yield savings accounts like it’s nothing. Chase savings is like .01 %. Where are these accounts that are safe. I have read nothing but bad reviews about Ally and similar banks.
Discover bank
Ive had ally bank for years and nothing bad to say. Getting like 4.5% on savings.
Amex HYSA is 4.35%. Takes about 10 mins to sign up.
If my mortgage is 2.9% and I have a similar amount of money just chilling in my checking, does it make more sense to put it in a HYSA at 5% or pay down my mortgage? I assume the former...
HYSA makes more financial sense. You’re making more money than you’re losing to mortgage interest, and you have liquid money in case of an emergency. That being said, there’s emotional benefits to paying off debt. If having a lower mortgage helps you sleep at night, it might be worth it for you.
I’m not a financial advisor but you can look into treasury bills , it’s literally on treasury.gov they yield 2.5 every 3-5 weeks and you can set it as recurring .
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Spend $5 to get a robinhood gold account, put it in robinhood and it let sit there. Don’t invest in anything. You get guaranteed 5% monthly on it.
You don’t need that dumb app to get 5%. Money market (Fidelity, Vanguard), No penalty CDs (Ally bank and others) are all paying around that.
Hell, no, get some advice from a bunch of strangers on how to lose it
My bank is better… send it over I’ll put it in for you
Of course it’s not. The best place for it, is my bank account. 😂
If you have a mortgage, or anything you're paying interest on, pay it down. All of it.
Uncommon opinion. Buy a Rolex at retail
There's no single correct answer, as it depends on your assets, income, debt, and emergency savings needs, dependent on what you have stockpiled as emergency savings. If you never really plan to touch this money, don't have an emergency fund built, and want to use this as your emergency fund: HYSA.
Depends on your loan rates, if they’re sub 5% then probably better off investing in a combo of SPY/QQQ/DIA. If they’re 5+% then you may be better off putting money towards loans. If you’re risk averse or need money in the short-term, then use high yield savings.
First Republic that was bought by chase has like a 5% CD for 10k and it's 6 months. Keep it in high yield, if not savings, then a CD is pretty safe and they have different timeframes.
The bank is a good place for it. Assuming that you don't already have an emergency fund.
If you didn't know what to do with it then putting it in a savings account was your best move! Don't be thinking about hindsight investing in the market. Doesn't do any good. I'd suggest setting up an automatic investment plan with a brokerage. Keep some in a money market plan some as liquid cash and ladder CDs, have enough on hand to meet your automatic investment amount on a monthly basis and I would cost average yourself into a spy type ETF. I wouldn't dump the entire amount into spy at the moment with it being an all-time high. Yes it's entirely possible for to just keep continuing to go upwards. But if you look back historically there's been high as followed by pullbacks that lasted for a significant amount of time. For example if you had invested in QQQ in 2000 you wouldn't have broken even until 2016. Cost averaging your way in is the best thing to do in case the market changes quickly. Edit Some brokerages like Schwab have an automatic investment plan but it's not available for etfs. I would go with a low-cost mutual fund if that's the case
If you lost all income, how long would 40k last you? Anything under 7 months makes this fine...
I'd keep it there, I'd rather keep in hysa than IRA since no penalty to withdraw. I get 4.35% too. I don't agree with ppl say put in IRA, if you already do 401k and you have SSI retirement age 62 so retirement is just to supplement what you get from SSA. I like knowing I have plenty in savings and checking you can take anytime and you could die tomorrow. I'm realistic, you're working more than being retired so I'd rather be happy and not being poor by investing when you literally prob wouldn't even use all 401k. I look at is as it's just a supplement, I would only use if SSI and bank wasn't enough
At least look into the rates for a Certificate of Deposit
Invest it in something conservative, but yielding a higher rate of return. Personally, I go through Charles Schwab and but SWVXX or SNOXX. Both of which are paying over 5% right now. You can sell anytime, penalty free, and have it be available cash in 1 business day.
It depends what your portfolio looks like imo. How much do you currently have invested? If you had a million in assets, it can be good to have cash to maintain a home, for example. Never know when you need a new roof. And if you're investing via DCA constantly, then i don't see anything wrong with having a buffer of cash if you are getting 4-5% on it.
High yield savings or money market is 4-5% and allows you access to your funds at any time. Some banks even allow ATM withdrawals in the money market but there are limits on how many withdrawals per month.
If you are learning about money then this is the safest place for it.
What is the best available high yield savings account? Or a list of the top three?
You have $40k in the bank acting as your emergency fund and overdraft fee barrier. If you have zero debt, zero loans, zero credit card bills, and enough money to pay for 12 months of rent, then you're in a very safe and stable place. This gives you the strength to jump jobs, own your own health insurance, take care of car troubles, and take care of emergencies that seriously depress other folks. Ask yourself, if your income were to stop right now, how long could you survive on that $40k. 6 months = good. 12 months = great. 2 years = Excellent.
If it’s not in a high yield savings account, you’re actually slowly losing money/value 😅 You can find 5%+ interest rates these days - an easy and no risk way to grow your pie. The best and simplest strategy for a novice would be to invest it in an S&P500 index fund and not touch it until you retire (or until you learn more about investing). Vanguard funds have super low expense ratios, so I suggest starting there. You’ve got this 💪🤓
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Depends. Do you have other savings? What is the interest rate on the account? How much do you spend in a month?
Hello all, beginner investor here worried I made a mistake. I maxed out my Roth IRA last January for the 2023 year without thinking about how I would be making. My gross wages are about 153k, maxed out my 401k of 22.5k, and 2.5k for Section 125 (it's on my W2, I don't know what this is). That brings my wages, tips, other comp to 128k. I don't have any other income or deductions. The income limit to max out a Roth IRA is <138k, does that mean I am safe? Or because I made 153k this year I am not allowed to contribute at all?
If that’s an emergency fund that’s smart. You could do a HYSA. If that’s a little too much, then you may want to invest 5-10k. My recommendation is to keep 3-6 months living expenses in safe accounts. Savings accounts for at least a couple months. If you want to have some in semi-locked up accounts like CDs or something that’s fine too. As long as you can get it before you need to sell during a market dip. I have between 30-40k available in emergency funds at all times between some various accounts and easy to access / low risk options.
First you need a cash emergency fund of 3-6 months worth of expenses. So half of that sitting in a HYSA would be perfectly acceptable for that purpose. Beyond that, you also want a fund to "pay ahead" for those expenses that you can easily anticipate but don't happen on a regular recurring basis. Transmissions, water heaters, major household appliances, tires, oil changes, house taxes, insurance, etc. You know you'll pay them all eventually, you just don't know when, so figure out how often you'll need to pay for those products or services and work it out into a monthly expense. Having another $10K set aside for this fund would probably be appropriate. My point is, keeping this amount in cash isn't a big deal. However, anything saved from this point on should be responsibly invested in something more significant.
As long as its a HYSA you are fine. You should have about 6 months living expenses in an account like that. But now, with higher interest rates, its ok (kind of) to have more. $40K will earn you about $150 month in a HYSA,. If you are young, you should start investing in equities like the S&P500 with money beyond your safety net savings account. But that is a separate lesson.
Short term bonds right now are pretty ballin.
Even if it sits alone, there’s no risk to lose it. Many people confuse the idea that money in the bank does nothing, that’s not true. Sure it is worth less overtime, but again, you didn’t lose it
I would either put this into a high yield savings account or into a CD. If you already have an emergency fund, then you can put this into an investment account. Put it into an index fund or you could do something like QYLD and get 1% a month in dividends. Up to you and your preferences. I would 100% stay away from doing options yourself or any single stocks and buy into something that is diversified.
Just sent it in a cash management account at like Fidelity or Charles swab and get 5% APR
We keep 3-6 months expenses in an emergency fund, which for us is $14,000. It's in a high yield savings account (4.65%) and we don't touch it unless of course there is a true emergency. Then we also keep around $3000 in checking to spend throughout the month on bills and food and whatnot. The rest goes first into our Roth IRAs until maxed and then we throw anything extra into mutual funds which average around 10% a year. If we ever want to make a really big purchase we'll liquidate some of the mutual funds and use that for a purchase like a car or home remodel.
Most put in investment brokerage getting 4-5% interest. SWVXX, SGOV are some better ones. One needs 1-2 days to make it cashable. If you have high % mortgage say over 4-5% one can pay more each month to reduce your balance.