Savings Account Recommendation: Interest for cash reserves

Rental Property Investor · Henrico, VA · Member since 2019 · 265 posts · 155 votes

Where do folks keep their cash reserves, any recommendations on banks or savings accounts, CDs, etc that offer at least some interest? Perhaps an online bank (only) that offers at least some return?

Of course, for a long time, interest on bank savings accounts have been extremely low, but I am wondering if there are some out there that offer at least some interest (2, 3, 4%). Or perhaps even a CD, seems you could always pull it out and forego the return if the money was actually needed. I have some cash reserves that I try to maintain for rentals (several months) but am looking for better alternatives to just letting it sit in account at 0.05% while at the same time having it readily available if needed.
thanks for any recommendations.

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Paul Vail

The Triangle, NC · Member since 2021 · 189 posts · 117 votes

Oh, and if you want a different cash parking place, check out i-bonds from TreasuryDirect. These are 30 yr savings bonds that can be cashed early (you must hold them for 12 months, and if you cash out between one and five years, you'll surrender 3 months of interest as a fee). Note the very attractive interest rates associated with Series I bonds. https://treasurydirect.gov/

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Paul Vail
The Triangle, NC · Member since 2021 · 189 posts · 117 votes
4y
Ally.com presently offers a 60mo CD at 3%, and a general savings account at 2% that automatically fluxes with the Prime. Cashing out the CD early will cost a few months' of interest only (dependent on term of CD). So, you could build a CD ladder, and when a particular owned CD's interest falls below the savings account interest rate, break the CD and roll into a fresh one at a higher rate.

For comparison, my local credit union, NCSECU, offers 0.85% on a 60mo note, and 0.10% on savings.
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Paul Vail
The Triangle, NC · Member since 2021 · 189 posts · 117 votes
4y
Oh, and if you want a different cash parking place, check out i-bonds from TreasuryDirect. These are 30 yr savings bonds that can be cashed early (you must hold them for 12 months, and if you cash out between one and five years, you'll surrender 3 months of interest as a fee). Note the very attractive interest rates associated with Series I bonds. https://treasurydirect.gov/
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Dave Skow
Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
4y
@Alex Forestif needing to access the funds - keep it in a money market account that you can access and deposit to easily ......no accounts are providing much of a return to worry chasing .....also try to keep the amount of transfers low because when you get a loan in teh future - most lenders will want to have explanations and documenatation for any non payroll deposits that appear on two months of statements that they will request
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Alex Forest
OP
Rental Property Investor · Henrico, VA · Member since 2019 · 265 posts · 155 votes
4y
@Dave SkowI looked into it some and there are CDs at 3.5%. Better than nothing but still not with a whole lot . I use checking functions to keep accounting separate for the LLCs (and personal) and each checking account has a minimum of a $2,500 balance to avoid a slight monthly fee. Which across several LLC accounts means there is cash sitting there.

Im stating to rethink the setup and perhaps holding in an S&P index enough reserves is a better way to think about it. I liked the idea of 'cash' in addition to other stock holdings, but theres got to be a better place for the sitting cash. I need the functions of a checking account (checks and separate accounting) but maybe need to rethink it and use a single account and then push the 'cash reserves' somewhere else like the stocks....if I think the minimum will likely be there for many years as a safety which I do.
Thanks for sharing your thoughts.
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Dave Skow
Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
4y
@Alex Forest- you are welcome
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Alex Forest
OP
Rental Property Investor · Henrico, VA · Member since 2019 · 265 posts · 155 votes
4y
Quote from @Paul Vail:
Ally.com presently offers a 60mo CD at 3%, and a general savings account at 2% that automatically fluxes with the Prime. Cashing out the CD early will cost a few months' of interest only (dependent on term of CD). So, you could build a CD ladder, and when a particular owned CD's interest falls below the savings account interest rate, break the CD and roll into a fresh one at a higher rate.

For comparison, my local credit union, NCSECU, offers 0.85% on a 60mo note, and 0.10% on savings.

Thanks for the ideas, including in regards to the CDs.
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Paul Vail
The Triangle, NC · Member since 2021 · 189 posts · 117 votes
4y
Quote from @Alex Forest:

@Dave SkowI looked into it some and there are CDs at 3.5%. Better than nothing but still not with a whole lot . I use checking functions to keep accounting separate for the LLCs (and personal) and each checking account has a minimum of a $2,500 balance to avoid a slight monthly fee. Which across several LLC accounts means there is cash sitting there.

Im stating to rethink the setup and perhaps holding in an S&P index enough reserves is a better way to think about it. I liked the idea of 'cash' in addition to other stock holdings, but theres got to be a better place for the sitting cash. I need the functions of a checking account (checks and separate accounting) but maybe need to rethink it and use a single account and then push the 'cash reserves' somewhere else like the stocks....if I think the minimum will likely be there for many years as a safety which I do.
Thanks for sharing your thoughts.
Alex, I've been in equities in some form or another since the Reagan recession years. I think I have a pretty solid understanding of them, and I do promote (index funds) as being part of one's investment life in a variety of vehicles. However, for cash, if this is money you absolutely need to park for legal or ethical reasons, then CDs or I-Bonds are really the way to go. Scratch that -- I use I-bonds for MY money. I'd use CDs for tenant cash and/or the 'Oh-Sh*t' maintenance fund for properties.

E.g., you are holding some tenant's security deposit while they rent. That money should go into a dedicated note (CD, etc) where it's otherwise untouchable. Your lease agreement may or may not stipulate an interest rate paid, but I personally feel a fiduciary responsibility in that scenario to do all I can to protect THEIR money. I wouldn't mind making 3% or 9% on their money, but I don't ever want to go to some other funds to refund THEIR money when they properly vacate. Being fiscally a bit shy about things, I'd also probably use CDs for the water heater/carpet/paint/etc. emergency fund for a property. These CD instruments can be cashed out immediately from online resources like Ally, and the interbank xfer achieved in a day or three. So they are very liquid. Sure the interest isn't double-digits, but I'd much rather make 3% than 0.2% in a money market for literally 3 minutes more computer effort. I'll take a 2.8% raise any day.

I wouldn't put the emergency fund into any index fund -- choose an FDIC tool for money that absolutely, positively needs to be there regardless of world affairs.
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Alex Forest
OP
Rental Property Investor · Henrico, VA · Member since 2019 · 265 posts · 155 votes
4y
Quote from @Paul Vail:

Quote from @Alex Forest:

@Dave SkowI looked into it some and there are CDs at 3.5%. Better than nothing but still not with a whole lot . I use checking functions to keep accounting separate for the LLCs (and personal) and each checking account has a minimum of a $2,500 balance to avoid a slight monthly fee. Which across several LLC accounts means there is cash sitting there.

Im stating to rethink the setup and perhaps holding in an S&P index enough reserves is a better way to think about it. I liked the idea of 'cash' in addition to other stock holdings, but theres got to be a better place for the sitting cash. I need the functions of a checking account (checks and separate accounting) but maybe need to rethink it and use a single account and then push the 'cash reserves' somewhere else like the stocks....if I think the minimum will likely be there for many years as a safety which I do.
Thanks for sharing your thoughts.
Alex, I've been in equities in some form or another since the Reagan recession years. I think I have a pretty solid understanding of them, and I do promote (index funds) as being part of one's investment life in a variety of vehicles. However, for cash, if this is money you absolutely need to park for legal or ethical reasons, then CDs or I-Bonds are really the way to go. Scratch that -- I use I-bonds for MY money. I'd use CDs for tenant cash and/or the 'Oh-Sh*t' maintenance fund for properties.

E.g., you are holding some tenant's security deposit while they rent. That money should go into a dedicated note (CD, etc) where it's otherwise untouchable. Your lease agreement may or may not stipulate an interest rate paid, but I personally feel a fiduciary responsibility in that scenario to do all I can to protect THEIR money. I wouldn't mind making 3% or 9% on their money, but I don't ever want to go to some other funds to refund THEIR money when they properly vacate. Being fiscally a bit shy about things, I'd also probably use CDs for the water heater/carpet/paint/etc. emergency fund for a property. These CD instruments can be cashed out immediately from online resources like Ally, and the interbank xfer achieved in a day or three. So they are very liquid. Sure the interest isn't double-digits, but I'd much rather make 3% than 0.2% in a money market for literally 3 minutes more computer effort. I'll take a 2.8% raise any day.

I wouldn't put the emergency fund into any index fund -- choose an FDIC tool for money that absolutely, positively needs to be there regardless of world affairs.

Thanks Paul. I don't tend to like the idea of keeping 'that' money in the stock market either. I just checked out the I bonds and they offer a remarkable 9+% right now. That won't be likely long term but that seems very nice for the time being. Thanks for the ally reference, I'll have to look into that and it may be a good place for a relatively stable constant amount of reserves that I'd like to keep either now if I don't instead go for the ibonds or in the future.
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Paul Vail
The Triangle, NC · Member since 2021 · 189 posts · 117 votes
4y
Quote from @Alex Forest:

Thanks Paul. I don't tend to like the idea of keeping 'that' money in the stock market either. I just checked out the I bonds and they offer a remarkable 9+% right now. That won't be likely long term but that seems very nice for the time being. Thanks for the ally reference, I'll have to look into that and it may be a good place for a relatively stable constant amount of reserves that I'd like to keep either now if I don't instead go for the ibonds or in the future.

Alex- yep, I'm a fan of having a lot of different tools in one's big bag. Wealth retention and building is a matter of becoming informed on whatever options are available, and some simple math ideas to displace real or invented ignorance and bias we experience over the years. The pundits pushing only one way to build wealth (real estate OR equities+bonds) and pretend we can only hold one concept in our heads frustrate me. Most all of financial management and wealth building concepts are accessible to any 8th grader, once we are made aware they exist -- diversify :)

The I-bonds adjust interest semi-annually. Ally changes their rates pretty much every time the Fed makes a move (as I imagine other decent banks do).
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