My Personal Finance Journey

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A Sampler of Good Cash Parking Lots

Contributed by mm | February 2, 2006 7:58 PM PST

A while ago I complained about having too much cash at hand. The problem was only partially resolved in the past couple of months when I made some steady purchase of mutual funds and stocks. However, I still expect I will hold on six-figure cash for a good while. The good news is: a number of outlets are offering 4-5% APY for your cash with little sacrifice on liquidity. Here are some of my picks:

ING Direct ($13,000): ING Direct is running a "Winter Save Up Sale" that offers 4.75% APY till April 15, 2006. The high rate only applies to new deposits after January 19, 2006. Fortunately, I vacated ING Direct back in February 2005, so I was able to re-inject some money to the institution and take advantage of the 4.75% yield. I plan to move more to the account in the next couple of weeks. Of course, a reminder has been set up to move back the funds in mid-April.

US Savings Bonds ($20,000): I have $16,500 in I Series bonds and $3,500 in EE series bonds. I Series bonds are yielding between 4.60% and 6.83% now, and EE Series bonds are yielding between 3.42% and 4.61% now. My plan is to liquidate the EE series part, and grow I Series bonds as appropriate. Opportunity may exist in May when Treasury will announce the new I Series bond yield for the following six months.

Treasury Bill ($30,000): I bought several batches of treasury bills at auction via Fidelity (and same can be done via Treasury Direct). These issues are currently yielding 4.303% to 4.499% and will mature between April 2006 and September 2006. In the first auction after the latest Fed hike, Treasury bill yielded 4.600% for 182-day maturity, 4.485% for 91-day maturity and 4.364% at 28-day maturity. A laddered strategy may make sense if the short-term rates keep climbing.

PayPal ($5,000): PayPal Money Market Account cannot commit to a fixed rate, but is yielding 4.38% in the last 7 days, making it one of the top yielding money market accounts available. (However, it has announced that PayPal will start to charge 0.25% management fee starting March 1. It will certainly make depositing at PayPal less attractive. Plus, PayPal Money Market Account is not FDIC-insured.)

Fidelity Money Market Account - SPRXX ($51,000): This is the cash pool for my investments via Fidelity. Its 7-day yield is 4.13% lately, making it a solid contender for my free cash.

Emigrant Direct ($1,500): EmigrantDirect used to hold most of my deposit, but my commitment is declining since October -- in October I have $99,000 at EmigrantDirect. EmigrantDirect is currently offering 4.25% but it is not attractive considering the other options I listed above.

Virtual Bank CD (Wishlist): VirtualBank is offering 4.75% APY for 6-month CD and 4.90% APY for 12-month CD right now. The downside is it takes $10,000 to open an account. Maybe I will take a try some time.

Of course, the above list does not exhaust high-yield high-liquidity options for your money. Living abroad robbed my flexibility to open new accounts and try new financial institutions. Check out this recent article "Banks Dangle High Teaser Rates" from WSJ for more options.

This Post Has Received 5 Comments. Share Your Opinions Too.


Guest Commented on February 3, 2006

HSBC is now offering 4.80% vs ING's 4.75% through April 30th.

I encourage you to get some precious metals under your belt ;)


Jaime Commented on February 3, 2006

MM, Are you still working on your 2006 financial plan? I am working on mine and am looking to get some more ideas. Love the Blog!


Mungeri Commented on February 8, 2006

Why so much cash? I have a suggestion, which will probably make most puke. Variable annuities. Yes, they are mostly god-awful, but there are good options - TIAA-CREF and Vanguard come to mind (and I prefer the latter) - with low fees and good diversification possibilites. And they allow for tax-deferred growth.


ashley Commented on February 18, 2006

Thanks for the work done. I was having the same problem and I think now it wouldn't be difficult for me to handle cash in hand.


Jack Commented on March 2, 2006

FYI. If u are in a high tax state(CA), the interest from T-Bills is free from state tax.
So, a 4.5% treasury bill is actually yielding close to 4.8% depending on your tax bracket.


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