Updated: Sep 10
You always hear people give a run down of things you shouldn't play with when it comes to things they take serious. Money is typically at the top of the list followed by food, kids, parents, etc.
In this post, I want to highlight how a client realized they were being played financially.
In my 20+ years of financial experience, I always get excited when I help a client achieve their financial AHA! moment. There are so many financial experts and resources out there telling you the best place to put your money, and it can be overwhelming. I always encourage my clients to stick to the basics.
Recently, I reviewed a client's saving portfolio and pointed out that they were leaving money on the table by putting majority of their savings in a High Yield Savings Account (HYSA) instead of a money market fund at a brokerage firm. Their immediate reaction was - "one thing I don't play with is my money, so what am I doing wrong?".
The answer is NOTHING. The client did nothing wrong. HYSA's and money market funds are two options you should consider as a saver/investor.
In my client's case, they had approximately $41K saved in their HYSA and only received $10 in interest payment for the month of August. At the end of the same month, the $11K balance in their money market fund had earned $45 in a dividend payment. So, two different accounts types but one makes more money than the other. Here's how I guided my client to their AHA! moment. Hopefully this blog post will help guide you to your financial AHA! moment as well.
With interest rates rising since early 2022, investors can now earn decent returns on short-term investments and their high yield savings accounts. Both accounts are great for saving for an emergency, a dream vacation, or a down payment on a home.
HYSA's are savings accounts generally available through online banks that offer higher interest rates (about 4 percent as of July 2023) than traditional bank savings accounts. Read more about HYSA's here.
On the other hand, money market funds are short-term investments offered by banks, brokers and mutual fund companies that invest in short-term securities such as certificates of deposit, U.S. Treasury bills and commercial paper. Money market funds are considered
- conservative, low-risk investment
- higher interest rates than high-yield savings accounts
- readily accessible just like an HYSA
- no minimum to invest
There’s no right answer that applies to everyone. Which account type makes the most Cense (sense) depends on your financial goals, how much money you have available to open a new account, and how much you plan to leave in the account. The money market fund is just a good way to make your savings make more money for you. Don't be the one out here playing with your money.
How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case. -Robert G. Allen
Do you have questions about savings products? Book your free 15 minute consultation today.