5 safe and smart savings accounts to park your cash

5 safe (and smart) places to park your cash

Maybe you’re an investor concerned about a jittery stock market. Or a home buyer assembling money for a down payment. Or just a steady saver building toward a goal such as a six-month emergency cushion or a vacation fund. Whatever the case may be, everyone should have a place to park their cash that’s safe—and even pays a little interest.

Before you suggest the underside of your mattress, consider what the Bank of Sealy offers: no insurance and zero interest. There are better options, most of which offer FDIC insurance up to $250,000 and pay some interest so that you can at least try to keep up with inflation.

For each type of account, I’ve included details from a real-life example that I think offers good rates, security, and access. But first, a caveat and a clarification: These details, including interest rates, are accurate as of this posting and subject to change. And I am not endorsing or being compensated by any of the financial institutions offering these accounts. For more information and options, check bankrate.com, depositaccounts.com, and nerdwallet.com.

Here is the rundown, broken into two major categories:

If you might need the money immediately 

  • Brick-and-mortar savings. This is just the plain-Jane account that’s often attached to your traditional checking account at your bank or credit union. You won’t find very competitive interest rates, but your cash is always an ATM or branch visit away.
    • Example: Citi
    • Interest rate: 0.04%
    • Fees: $4.50/month
    • FDIC insurance: yes
    • Minimum: $500 ($4.50/month fee waived)
    • Time frame to access funds: immediate
  • Online high-yield savings. The right online savings account (read: no fees, no minimum balance) is the ideal place to park your six-month emergency savings cushion. If your checking account is at a different institution, be sure you know how long a transfer will take before you can withdraw cash—it’s usually a day or two.
    • Example: Ally
    • Interest rate: 2.20%
    • Fees: none
    • FDIC insurance: yes
    • Minimum: none
    • Time frame to access funds: immediate if you also have an Ally checking account; 1 to 2 days if you must transfer from Ally to another bank’s checking account
  • Money market funds (MMFs or money funds): Considered nearly as safe as a traditional bank savings account, money funds have also, at various times throughout history, paid higher interest rates. Because they comprise low-risk, short-term investments such as treasury bills and government securities, and they’re easy to move money into and out of, money funds are a go-to for investors as a “core cash fund” when buying and selling investments.
    • Example: Fidelity
    • 7-day yield: 2.25% (what you’d earn in a year, recalculated weekly)
    • Fees: 0.42% expense ratio (included in the 7-day yield)
    • FDIC insurance: no
    • Minimum: none
    • Time frame to access funds: immediate

If you can wait a while before you need your money

  • Certificate of Deposit (CD). If you’re willing to lock away your money for a predetermined length of time (three months to five years), you can often get a higher interest rate with a CD than with a typical savings account. Caveat: Buying a CD is essentially placing a bet that the rate you’re getting is better than anything you’ll get during your chosen term. If prevailing interest rates increase while your money is locked away, you may end up losing out with your fixed CD rate; you have to pay a penalty—often three to six months of interest—to break out of the CD before your term is up.
    • Example: Barclays
    • Interest rate: 2.65% for a 1-year CD
    • Fees: none if you keep to the agreed term
    • FDIC insurance: yes
    • Minimum: $0
    • Time frame to access funds: 1 year from date of opening
  • I Bonds. The return on these U.S. Treasury bonds is tied to the government’s Consumer Price Index, so they are inflation-protected. Plus, because they’re government-issued, there’s no state or local tax on the interest you earn. (You will owe federal tax once they’re cashed in.)
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