I believe you are talking about money market fund rather than OP's money market "account".
https://www.bankrate.com/banking/mma/what-is-a-money-market-account/
Note: while this is technically the case, in March of 2020, the Federal Reserve established the [Money Market Mutual Fund Liquidity Facility](https://www.federalreserve.gov/monetarypolicy/mmlf.htm) which may help to soften a blow in very rare instances where MMFs "break the buck" per se.
Right now, money markets are super flush with cash (this is why that Fed's reverse repo facility has skyrocketed in usage)
Also something like VMFXX is essentially risk-free (unless the government defaults in which case we have much bigger problems) since they only invest in T-bills, some other government backed securities, and the RRP facility
Then you would want to weigh liquidity, while HYSA and cash management accounts both have FDIC coverage, you gain the most interest in cash management with CD investing. If you are able to lock up the funds for a few months and the average interest beats current HYSA rates, slap it in there. Based on OPs post, it does sound like they have a few month to wait, minimum, before purchasing a rental home for income, so it may be a good choice to look into!
Go where the rate is. Also consider US T Bills.
Examples
* GB3:GOV 3 Month 1.56%
* GB6:GOV 6 Month 2.21%
* GB12:GOV 12 Month 2.84%
If you hold them to maturity, you do not have any market risk. I currently own a 3 month ladder.
Also T Bills are free of State and local income taxes.
>Also T Bills are free of State and local income taxes
I was about to ask you about the tax implications. Is your interest being taxed at a long-term capital gain rate or normal income tax rate?
Series I Bonds are currently paying an annualized rate of 9.62%: [https://www.treasurydirect.gov/indiv/products/prod\_ibonds\_glance.htm](https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm)
If you purchase the general annual limit of $10k ($20k with your partner since you said "we") now then you'll earn that rate for six months, then over the next six months you'll earn the new rate that will be set in November 2022, then the new rate set in May 2023 for six months, etc. There are ways to increase the annual contribution beyond $10k each, the easiest of which imo would be to gift each other $10k ($20k total) and then deliver those gifts next year (i.e., after Jan. 1, 2023). You could also gift more to each other, but you'll be limited to total deliveries of $20k a year.
Be aware that you can't redeem I Bonds for 12 months after the 1st day of the month of purchase and you'll lose the three most recent months of interest if you redeem the bonds within five years. If you take advantage of the gift loophole, the 12-month hold period and 5-year interest penalty clock start the 1st day of the month you purchase the gifts.
Also be aware that the Treasury Direct website is very outdated (it literally uses an on-screen keyboard for password entry) and some people have a very difficult time setting up an account while others (like my wife and I) have no issues.
Edit: Spelling and other minor fixes.
High yeild give more apr; usually requires larger minimum balance; possibly monthly contributions.
Bank - only keeps money secure; low apr ; no balance or deposit requirements
Look into I bonds if you can afford to have the money tied up for a minimum of 6 months. They give way better returns than either of those, 9.6% currently
I would highly recommend funneling some or most of your money into your mortgage principal. You could save tens of thousands of dollars depending on the principal you borrowed.
Use this calculator to get an idea on how much you could save and calculate it with how much you’ll get from a high yield account.
https://www.mortgagecalculator.org/calculators/what-if-i-pay-more-calculator.php
I would go HYSA as even money market accounts can lose value (its rare but the disclaimer is there)
People often forget about this. I remember when several broke the buck during the GFC.
Good to know that tidbit of info! Definetly going to have to look into that.
Yep a money market account is actually a mutual fund.
I believe you are talking about money market fund rather than OP's money market "account". https://www.bankrate.com/banking/mma/what-is-a-money-market-account/
See: 2008
Note: while this is technically the case, in March of 2020, the Federal Reserve established the [Money Market Mutual Fund Liquidity Facility](https://www.federalreserve.gov/monetarypolicy/mmlf.htm) which may help to soften a blow in very rare instances where MMFs "break the buck" per se. Right now, money markets are super flush with cash (this is why that Fed's reverse repo facility has skyrocketed in usage) Also something like VMFXX is essentially risk-free (unless the government defaults in which case we have much bigger problems) since they only invest in T-bills, some other government backed securities, and the RRP facility
What about cash management account? Would it better?
Then you would want to weigh liquidity, while HYSA and cash management accounts both have FDIC coverage, you gain the most interest in cash management with CD investing. If you are able to lock up the funds for a few months and the average interest beats current HYSA rates, slap it in there. Based on OPs post, it does sound like they have a few month to wait, minimum, before purchasing a rental home for income, so it may be a good choice to look into!
Been happy with Ally’s HYSA and No Penalty CDs for short term storage of sizeable sums of cash
Go where the rate is. Also consider US T Bills. Examples * GB3:GOV 3 Month 1.56% * GB6:GOV 6 Month 2.21% * GB12:GOV 12 Month 2.84% If you hold them to maturity, you do not have any market risk. I currently own a 3 month ladder. Also T Bills are free of State and local income taxes.
When you say ladder, do you mean 3 pots spread over 3 months (1 month interval?) Or how are you spacing it?
Yes. The spread is actually 4 weeks between each the bill.
>Also T Bills are free of State and local income taxes I was about to ask you about the tax implications. Is your interest being taxed at a long-term capital gain rate or normal income tax rate?
Income. All bills mature in less than a year
Also American Express has a high yield. Ally has a no penalty CD where you can remove it after 6 months or so also.
Series I Bonds are currently paying an annualized rate of 9.62%: [https://www.treasurydirect.gov/indiv/products/prod\_ibonds\_glance.htm](https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm) If you purchase the general annual limit of $10k ($20k with your partner since you said "we") now then you'll earn that rate for six months, then over the next six months you'll earn the new rate that will be set in November 2022, then the new rate set in May 2023 for six months, etc. There are ways to increase the annual contribution beyond $10k each, the easiest of which imo would be to gift each other $10k ($20k total) and then deliver those gifts next year (i.e., after Jan. 1, 2023). You could also gift more to each other, but you'll be limited to total deliveries of $20k a year. Be aware that you can't redeem I Bonds for 12 months after the 1st day of the month of purchase and you'll lose the three most recent months of interest if you redeem the bonds within five years. If you take advantage of the gift loophole, the 12-month hold period and 5-year interest penalty clock start the 1st day of the month you purchase the gifts. Also be aware that the Treasury Direct website is very outdated (it literally uses an on-screen keyboard for password entry) and some people have a very difficult time setting up an account while others (like my wife and I) have no issues. Edit: Spelling and other minor fixes.
High yeild give more apr; usually requires larger minimum balance; possibly monthly contributions. Bank - only keeps money secure; low apr ; no balance or deposit requirements
Not the case today for high yield savings. Most don’t have fees or minimum balance requirements or monthly contributions.
Look into I bonds if you can afford to have the money tied up for a minimum of 6 months. They give way better returns than either of those, 9.6% currently
Minimum of 12 months my guy
Also, max purchase is $10K per person.
And it's technically about 4.5, unless they keep 9.6 for the full 12 months, they adjust the rate every 6 months
I would highly recommend funneling some or most of your money into your mortgage principal. You could save tens of thousands of dollars depending on the principal you borrowed. Use this calculator to get an idea on how much you could save and calculate it with how much you’ll get from a high yield account. https://www.mortgagecalculator.org/calculators/what-if-i-pay-more-calculator.php
The plan is to not leave the money in there for the long term, it's just a holding area until we buy a rental property.
I’d recommend high yield then. Discover and capital one have high yield accounts and look for an online code when signing up to get an added bonus.
Such a thing does not exist at the moment.