How many of you feel that you know your money well? If you received $3,000 tomorrow, where would you place it? More importantly, why would you place it there?
Most of us spend our 20s and 30s building and ignoring debt. At some point, we get out of debt, and then we are left in the wilderness. We have cash coming in, but where does it go?
My goal today is to give you a rundown of five places to park money to receive a safe return. Although the yields are not very high compared to the stock market, these products are much safer.
A High-Yield Person Earn $100,000 Passively
Don’t let these simple accounts fool you; they are actually quite complex on the institutional side. Most wealthy people park tons of cash into these accounts every year to ensure their money keeps growing.
High-Yield Savings Account. HYSAs are rather new to the investing scene because the highest-yielding banks only have an online presence.
My favorite high-yield savings account is from Discover, and it currently pays 4.16% interest. I also have a cashback debit card that gives me 1% of my spending back, which goes directly into my HYSA.
The purpose of a HYSA is to provide a safe place to store your emergency fund, with quick access to your cash via an attached checking account.
The Beauty of Rental Income
My poor HYSA recently went from $10,000 to $2,000 because I bought a tiny home. So, I am in the process of rebuilding it by 2025.
Series “I” Bonds. The US government offers one of the best financial products on the market in the form of Series “I” Bonds. The only problem is that there is a $10,000 annual cap on purchases.
Series “I” Bonds are so amazing because they avoid taxes for 30 years, adjust based on inflation (not interest rates), avoid state tax, and can be used tax-free for educational purposes.
The purpose of Series “I” Bonds is to be a tax-free accumulating resource that also adjusts to inflation; you pay taxes upon redemption. The goal is for your $1,000 Series “I” Bonds to be worth $1,000 in 30 years—a 3% annual inflation rate translates to roughly $2,427.
You can use Series “I” Bonds in many of your financial planning, including investing for kids, education planning, and wealth building. Most hardcore investors avoid Series “I” Bonds simply because of the $10,000 annual cap.
Use Dividends as a Safety Net
Certificates of Deposit. Many people do not trust online-only banks and prefer to stay with their local bank or credit union. These institutions offer certificates of deposit (CDs) so their customers can grab yield.
A CD allows you to lock up your money for a set timeframe while collecting a set amount of interest from the institution. For example, Navy Federal is offering a 12-month CD with a 5.30% interest rate to customers for up to $3,000.
An important thing to remember is that banks do not like to lose money or give extra money away. Therefore, CDs will always have stipulations in the bank’s favor because the bank is on the hook to pay you (no matter what interest rates are in the future).
The purpose of a CD is to lock in a high yield at your local bank or favorite credit union. CDs may be good if you think interest rates will decrease, so you want to lock in rates.
Transfer of Wealth in the Metaverse
However, if rates are rising, like in 2022, then there are better places to park your money. I prefer a HYSA from an online bank because they adjust rates automatically in the background—no action is required on my part.
Treasury Bills. Investors with lots of money to park will gravitate to Treasury Bills. They offer investors short-term investments that can roll over and ladder.
The government issues T-Bills for 4, 8, 13, 17, 26, and 52 weeks. These timelines become essential when discussing saving for a specific purpose.
The purpose of Treasury Bills is to park money short-term, lock in current rates, and keep your money active. Investors consider Treasuries risk-free assets, although they do not have FDIC protection.
If you have $100,000+ to invest for a few months, this is the place to do it. Entering the Treasury market puts you at the center stage of the largest bond market in the world (US Treasuries).
Create an Online Course for Passive Income
Money Market Funds. I consider money market funds to be the high-yield savings accounts inside your stock market brokerage account.
Sometimes, you sell an investment and want to sit on the money for a month or two. It is cumbersome to transfer the money out to a HYSA. That’s where MMFs come into play.
The purpose of Money Market Funds is to grab yield while waiting for the next big investment. Investors want to have their money as close to the market as possible, and MMFs provide that security.
Should you open a brokerage account just to invest in an MMF? Probably not, unless you plan on investing in stocks and ETFs over the next few months.
I like to use the MMF brand that comes with the brokerage; for Wells Fargo, I use WOTXX, and for Charles Schwab, I use SWVXX (for example).
Putting it all together. So, what are you supposed to do with these disparate accounts? The good part is that you can mix and match as you see fit.
Let’s do some quick profiles and see how they could potentially leverage these accounts. The more you know about each, the better you can allocate your resources.
Your First Five Dividends Stocks
Average person with an emergency fund. They can use a HYSA for the majority of their emergency fund, plus add some Series “I” Bonds for inflation protection and tax relief.
Average saver in California or New York. They want to use Series “I” Bonds as much as possible. Remember that interest payments from HYSAs and CDs are taxed at the federal and state level. They should also use T-Bills as a source of income because they also avoid state taxes.
Person that loves their local bank. I know many people who will not invest in the stock market or put money into an online-only bank. They also don’t know anything about US Treasuries. Their only option is certificates of deposit.
Hardcore investor. The hardcore investor uses Treasury Bills and money market funds to keep their money growing at all times. I attached a checking account to my Charles Schwab brokerage that can act as a conduit between the stock market and the Treasury Direct website.
The average homegrown investor. This is where I fit in. I use all of these products except for CDs. I also purchase 30-year Treasury Bonds versus T-Bills. I like tracking all these products going into recession because I want my money in the best possible places.
Happy Cash Flow Retirement 6
Conclusion. This article is just a taste of what we should all know as mini-investors. The rich know about all of these products and talk about them in their circles.
Sadly, the middle class doesn’t follow these resources as intently. But we can change that by getting involved.
The first thing I did was open a HYSA in 2019, followed by my TreasuryDirect account. I opened TreasuryDirect accounts for my kids and set up auto-investment in Series “I” Bonds for them and me.
I started buying Treasuries and opened my money market fund in 2023. I’m slowly getting involved in the world of wealth protection.
Real Estate Investing in Your 30s
I like to grow my wealth outside of the markets with things like writing books and roommates. However, once I acquire this money, I must ensure I put it in the best possible place.
If we take our money seriously, it will grow. I document every single penny that comes in from interest, dividends, pensions, rents, royalties, and the GI Bill.
At the end of the year, I can see the power of compounding. The only way to compound your money is to compound your financial intelligence first. The more you know, the more you grow. Good Luck!
- PDF of the Month: Don’t Gamble with Retirement 12 (Free 460-Page PDF)
- Free PDF Downloads: Download FREE PDF LIST here
- Financial Mindset: Become CEO of Yourself 2 (Free 196-Page PDF)
- Retirement Planning: Your Retirement Planning Guide 2 (Free 255-Page PDF)
- Investing: How We Plan to Retire on Dividends 4 (Free 139-Page PDF)
- Cryptocurrencies: Counting on Crypto 2 (Free 159-Page PDF)
- Real Estate: Financial Independence through Real Estate 4 (Free 112-Page PDF)
- Business: Retire Rich, Retire Comfortable with a Business 4 (Free 149-Page PDF)
- Latest DGWR: Don’t Gamble with Retirement 11 (Free 410-Page PDF)
- Everything!: The Biggest Book on Passive Income Ever 4! (book)(Web Edition)(Art Edition)
- Writer’s Comparison: M1 Macbook Air vs. GalaxyBook3 Pro 360
- Read My Books for Free: Free Kindle Books Schedule
- Book Design: Design Tips on YouTube
- Kindle Unlimited: Why I Finally Subscribed Kindle Unlimited (learn more)
- Book Reviews: 505 Takeaways from 101 Books (pdf)
- Writing: The Publishing Chronicles (Part 1, Part 2, Part 3, Part 4, Part 5)
- Best REIT- Fundrise: Fundrise vs. US Treasuries (Join Fundrise)
- Follow us: On our Facebook Page and Join our Facebook Group
- Support the Channel on Cash App: $Kingmarine1981
- For more detailed analysis, join my Youtube: MFI YouTube Channel
PDF of the Month: Don’t Gamble with Retirement 12 (Free 460-Page PDF)
Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
Leave a Reply