Where are People Parking Their Cash Nowadays?

I was very embarrassed this past Saturday when my husband turned to me, from his conversation with his brother and aunt, and asked me what the current yield is for one of our money market funds. It was embarrassing because it had been at least three months since I looked at what the yield for this account was. Needless to say, I spent a few minutes the next day checking out the money market funds where our emergency funds are saved.

We currently have our emergency fund (really all six month’s worth of expenses) saved in two different accounts. One is with Vanguard and the other one is with Fidelity. Even though we have truly commingled finances in this household for some reason we have our cash savings split into his and her accounts. I guess it can be seen as another way to diversify, not only holding our money in one investment company but in two.

The real reason was that initially we wanted our savings to be split into a money market fund and CDs. At the time this decision was made CDs offered by Fidelity where slightly better than those offered by Vanguard. But as six months went by and I got tired of having to make a decision every three months as to where to move the funds that were coming due from the CDs I decided to switch them all to a money market fund with Fidelity.

As I was looking what yield we were getting on both, I was not surprised by the unpleasant results. The Vanguard Fund is yielding 2.96% and the Fidelity one 2.66%. With core inflation rates well above these marks I am not happy at all that I am losing money every time the clock ticks and I don’t take action. But what action can I take? Switch to CDs? I just looked into these and a 3-month CD is getting 3.2%, a 6-month one 3.4% and the year long one is offering 3.55%. All of these are better, but just marginally, than the money market funds we are in right now. Is the difference significant enough for us to give up some of the accessibility to our funds the money market funds offer?

I didn’t hesitate twice to contact Vanguard CS to see if maybe I was better off investing in an inflation protected security. But the CS person was quick to let me know that these are two completely different types of funds and that even when the IPS seeks to protect our capital from inflation it is riskier than a MMF.

So, I am asking: Has anyone found a decent option to protect cash savings from rising inflation?

Share This Post



Comments

8 Responses

  1. Mrs Mecomber 11 years ago
  2. Becky@FamilyandFinances 11 years ago
  3. Kim 11 years ago
  4. Jackie 11 years ago
  5. MoneyCommonSense 11 years ago
  6. Mrs Mecomber 11 years ago
  7. SuperSaverSusan 11 years ago
  8. MoneyCommonSense 11 years ago

Add Comment