Hey everyone, I’ve got $40k in savings sitting in my regular bank account, but I’m realizing I could be earning more interest elsewhere. Where’s the best place to park this money to maximize returns?
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I chose Discover’s high-yield savings account because I already had an account with them, which simplified the process. I spent too long overthinking and worrying about making the perfect choice. Looking back, not making a decision was a decision in itself, and it ended up costing me money.
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Good to hear, thank you!
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For most people, a money market fund is often the best option because it offers higher yields compared to almost all savings accounts and potential tax advantages, making it more advantageous after taxes. Government money market funds, like savings accounts, are among the safest investments available and typically pay dividends monthly.
You can access money market funds through any brokerage account, although each broker offers a limited selection. Vanguard, known for its low fees, tends to offer some of the highest yields. Vanguard’s money market funds can be purchased through a Vanguard account, E*Trade account, or a JP Morgan account (associated with Chase bank).
One fund I recommend for those seeking safety with high yield is VUSXX, which currently yields 5.19% with approximately 80% of its interest exempt from state tax.
Alternatively, SGOV is an ETF (exchange-traded fund) available at any brokerage, offering a yield of 5.28% with almost 100% of its interest exempt from state tax. The main difference from VUSXX is that you need to buy discrete shares (approximately $100 each) rather than investing any dollar amount.
Feel free to ask if you have any questions!
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Thanks, I’ll check those out. My current bank, Fifth Third Bank, offers a ‘Money Market savings’ account that advertises higher yields, but when I checked the actual yields, it’s the same as my current savings account (0.01%). I’m wondering if I’m missing something here?
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Yes, some banks and credit unions offer a money market account, which is different from owning shares of a money market fund.
I used Discover Hysa because I already had an account with them, which made it easy. I was too worried about making the right choice for too long and couldn’t stop analyzing everything. When I look back, I can see that none of the choices I made cost me money.
When I had a similar dilemma with my savings, I decided to explore options beyond my regular bank account to maximize returns. After researching various options, I found that high-yield savings accounts and certificates of deposit (CDs) offered competitive interest rates. High-yield savings accounts typically provide higher interest rates than traditional savings accounts, and they offer easy access to funds. On the other hand, CDs lock in your money for a specified period at a fixed interest rate, which can be higher than savings accounts but with less flexibility.
I opted to split my savings between a high-yield savings account for emergency funds and shorter-term goals, and CDs for longer-term savings goals, ensuring a balance between accessibility and maximizing returns. It’s important to compare rates, terms, and any fees associated with different accounts to find the best option that suits your financial goals and risk tolerance.