[USER]

I know it’s probably too much cash on hand, but I’m sitting on just shy of $100k in Ally. It’s currently earning 3.8%

Reason for so much is I work in sales and the industry can have high turnover.

I have been laid off twice in the last 2 years. With this I decided to stock pile to make sure if it happens again I have a large “emergency fund” to be able to live on for up to a year incase something happens again and I have trouble finding something new.

I don’t want to have to worry about taking a job right away if it’s not the right fit just because I need an income.

Anyways, I know there are more HYSA with slightly higher %, but is a HYSA the best option for storing money that may need to be liquid?

I do feel it’s too much, but it also makes me comfortable.

[Adam]

Money market fund would be another option. Vanguard (vmfxx) is yielding 4.35% right now

[Grace]

I could have written this as a freelancer 15 years ago – I did the same thing. The peace of mind also helped me make better decisions for myself, like only working with clients I wanted to work with and turning down smaller jobs in favor of bigger ones.

This is not a wrong approach. Looking back now, I would have kept $50K fully liquid and put $50K in Vanguard.

I didn’t really need THAT much all available at once, and the other half would be sellable if really needed. (And I live in the NYC area – HCOL – so I get it.) But do what gives you peace.

[John]

You don’t need all of it to be liquid right away. So maybe put $40-50K in a liquid HYSA; the rest in higher interest CDs.

[Linda]

I was in sales and did the same for many years. My piece of mind was more important than chasing the highest yields.

You can look at money market funds at Fidelity and Vanguard and decide if its worth moving.

[Tony]

If I had that much cash on the sidelines, I’d be opening bank account bonuses left and right.

[Bat]

Do whatever makes you feel better.
Don’t forget that the government prints over 10% on average every year, so that’s how much you’re getting diluted on your USD, minus the 3.8% + taxes

[Steven]

Whatever amount you think is needed to be liquid like this, you might consider investing it in a U.S. broad market investment grade ultra-short term bond ETF (funds accessible in 2 to 4 business days).

This type of ETF usually provides a little more overall long-term growth than do savings (including HYSAs) and money market accounts, no-penalty non-callable CDs, and money market mutual funds.

Be aware, however, that for the benefit of usually a little more overall growth, the ETF’s share value can decrease a little while short term bond interest rates are increasing due to the bonds in the ETF having a little interest rate risk.

On the other hand, and due to the same interest rate risk, the ETF’s share value will tend to increase a little while short term bond interest rates are decreasing.

Two example U.S. broad market investment grade ultra-short term bond ETFs to consider are the BlackRock Ultra Short-Term Bond ETF, ticker ICSH, and the Vanguard Ultra-Short Bond ETF, ticker VUSB.

Today, their 30-day SEC yields are 4.84% and 3.84%, respectively.

The SEC yield takes into account (is after subtracting) the fund expenses. ICSH presently has less interest rate risk with its lower effective duration (0.43 year for ICSH versus 0.91 year for VUSB).

Hold such an ETF in a brokerage account or, through permitted contributions, accumulate it in Roth IRA.

To reduce your interest rate risk even more and to further increase share value stability over time while still providing yield, you might consider an investment grade ultrashort floating rate note ETF.

[Jo]

HYSA is perfect. I have done the same and saved any additional after tax investments in a brokerage account.

This kind of large amount on hand helped me to not be concerned about workplace reorg’s and “right sizing” activities for 15 years.

I think that is what kept me onboard in a high turn over workforce. Kudos for taking control of your situation!

[Anna]

The right amount to have on hand is the amount that helps you sleep at night.

[Edgy]

I keep twice this amount in Vanguard money market. At 4.4% yield it is paying more than bond ETFs with zero volatility compared to bonds.

And if I need cash, it’s in my checking account the next day.

I see absolutely nothing wrong with your approach

[Nicole]

I would keep 6-12 months at Ally and move the rest to Vanguard brokerage

[Dawn]

I’m in sales, and I do the exact same thing. Most of my money is working hard for me, but I do keep a year of expenses in a HYSA just to have peace of mind.

[Tamara]

I’m in sales too and I have a year of expenses in a money market fund at Fid and a small amount in an HYSA.

[Catherine]

HYSA if your older and anything having to do with the stock market (investing) when your younger.

[Chris]

A HYSA like Aly is great. Another option is M1, put it in the market and if you NEED some you can either sell or take a low rate loan against your portfolio and not have a taxable event.

[Laila]

Money market funds at Vanguard, Schwab and Fidelity are good.
You can choose the most conservative funds, that are solely comprised of US government treasuries.

You can search for tickers such as:
VMFXX (Vanguard)
SWVXX (schwab)
SNVXX – schwab
FZDXX – Fidelity

These are all paying approximately 4.25% to 4.39% right now
—-
While Vanguard currently pays a bit more (4.39%), I believe only Schwab and Fidelity easily give you the ability to order and write checks, and use a debit card to make withdrawals.

With Vanguard, I believe, the only easy ways to access the money might be something like ACH transfers, wire transfers, or having them send you a check, perhaps.
—-
One purchases money market funds like one purchases any other mutual fund.

It can take about 1 to 2 business days to settle, whether you are buying or selling the mutual funds.

If you buy on a Friday, I believe the transaction often won’t settle until Monday or Tuesday.

So, any money in these money market funds may take about 1 to 2 business days to sell, and then you would need to transfer the funds, or write a check against the funds, etc.

We have had no issues with all of this, and find it well worth it, in order to receive such a high interest rate, which at one point was perhaps as high as about 5.5%.

[Author]

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