Situation: My wife and I both are working in well-paid tech industry jobs. Our salaries are more than enough to pay all bills. No debt - house, car, everything paid off. One kid is in college and no debt there either, I pay his tuition. Other kid in high school.

So at this point, I have about $125k in my checking account. I have kept it aside to pay my son's complete college expenses, he goes to a very good state school (not tu ) so we get in-state tuition. I don't want to put the money in the stock market and potentially lose some of it though in 4 years it is almost certain that I will be in the plus.

So what are my options to park cash where I can get it out reasonably quickly? It's currently earning 0.01% at Chase Bank.

You may need to define "pretty quickly" a little more. I would, and have, put that amount into EPD & ET, both paying almost 8% in dividends. There's your tuition(my guess) for 1 year.

There is some other, safer options. AMEX has a high yield MMA I believe. They keep sending me info to put money there.

Ally Bank has a 4% "no penalty CD". Rate fixed for 11 months, but no penalty to withdraw whenever. Six month US treasuries =5.07%, 1 year=4.97%, 2 year=4.85%. Private equity usually beats these returns but more risk and less liquid.

A guy asking for a place for cash to cover expenses and adverse to losses should not look at private equity

I was in the same boat as you. No debt and aboit $200k in cash. Parked $130k in a high yield savings account at Marcus by Goldman Sachs currently earning 3.75%. Just spoke to my advisor on Friday and I'm about to put about $30k in a brokerage account and will keep the remaining $60-70k in my Chase account.

https://investor.vanguard.com/investment-products/mutual-funds/profile/vmfxx

VMFXX getting 4.52% at the moment

12thMan9 said:

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You may need to define "pretty quickly" a little more. I would, and have, put that amount into EPD & ET, both paying almost 8% in dividends. There's your tuition(my guess) for 1 year.

There is some other, safer options. AMEX has a high yield MMA I believe. They keep sending me info to put money there.

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That means at most thrice a year, when the term tuition payments are due.
I want to avoid a situation where money is stuck until some holding period expires, else there's some fee/penalty.

I googled it just now, EPD/ET is new to me... let me check it out.

Your broker should have a number of 4.5ish money market mutual funds to offer without load. Pay attention to liquidity/gates in the prospectus. He should know which ones (generally treasury/government ones) do not gate.

Mine also has a 4.24ish FDIC insured money fund depending on what "safe" means to you. 1 year CDs are in the 5ish range right now. After that on the risk spectrum, you start looking at short duration bond funds in the high 4s (with the chance to go up...or down).

TBills. 26 weeks are 5.15+ is the sweet spot if you can deal with that length of being illiquid. 13 weeks around 4.8% I think.

OP...

I echo the comments right below your post from 12thMan9. I got into Midstreams (EPD, MMP, ET, MPLX) about three years ago. Yes, they are stocks...but they are stable and pay really nice dividends...plus offer growth opportunities. They issue K-1's which some don't like...I've never had an issue tho.

Some other good replies as well. Good luck and congrats on being debt free.

I use TBills through Treasury Direct, buying either a short term 4 or 8 week bill with automatic reinvestment, or with a known date like a fall tuition payment a duration that returns when I need it. They sell 4, 8, 13, 17, 26, and 52 week bills. Bills are currently issuing between 4.6 and 5%. So if I was holding cash for a tuition payment due in late August, I would buy a 17 week TBill paying 5%.

How often do these things compound? If I see one that says it compounds daily, let's say 4 percent, does that mean that if I put in $100 on day one, I will have $103 on day two? And $106.3 on day three?

A couple of months ago, we bought some 12 month CD's at 4%. We split up into smaller ones in case we see something we want so we wouldn't have to cash out the whole thing. Local bank - no penalty if we cash any out.

Milwaukees Best Light said:

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How often do these things compound? If I see one that says it compounds daily, let's say 4 percent, does that mean that if I put in $100 on day one, I will have $103 on day two? And $106.3 on day three?

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Pretty sure there's no way it compounds daily like that. It would be astronomically high after 1 year. I think you need to use 4% / 365.

Milwaukees Best Light said:

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How often do these things compound? If I see one that says it compounds daily, let's say 4 percent, does that mean that if I put in $100 on day one, I will have $103 on day two? And $106.3 on day three?

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This made my head hurt. Username fits?

If you are getting 4% compounded daily, you get 1/365th of 4% every day applied to your balance (initially $100). After one year, you will have $104 and a bit of change (as the interest applies to an ever so slightly larger balance every day), versus exactly $104, if the interest were compounded annually.

Hope that helps.

This is a cut paste from Ally. Hopefully one of yall can explain to me how it works. Thanks,

Your money earns money with interest compounded daily .
Rate is variable and may change after the account is opened. Deposits are insured by the FDIC up to the maximum allowed by law.


https://www.ally.com/bank/online-savings-account/

Ok. That makes sense. Thanks. Figured it was too good to be true.

Milwaukees Best Light said:

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Ok. That makes sense. Thanks. Figured it was too good to be true.

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As far as where to park the cash, there are any number of FDIC-insured accounts paying in the 3.5-4.5% range. Also, brokers such as Fidelity and Schwab have money market funds that can be used within an investment account that are paying in the low to mid 4% range.

I just invested some accumulated brokerage account cash in my Schwab account - 1/2 each in money market (4.4% or so) and 1/2 in tax-free money market (3% ish).

If you don't have a discount brokerage account yet I would set one up with either Schwab, Vanguard or Fidelity and just park the money in their money market (currently paying between 4.1-4.6%) and maybe buy some brokered CDs with some of it in the same account and lock in some rates over 5%.

Tbills

YouBet said:

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Yes, your immediate easy button is an online savings account. I'm earning 4.5 in mine.

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Thanks! Which one?

infinity ag said:

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YouBet said:

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Yes, your immediate easy button is an online savings account. I'm earning 4.5 in mine.

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Thanks! Which one?

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Goldman. The evil empire.

Agree - I'd make very sure that your amount in that account is covered under SIPC (roughly equivalent to FDIC) insurance at Robinhood before investing.

A family member uses Fidelity, and their sweep account (all remainder cash in her investment account is automatically swept into this fund) is currently paying 4.47%. This is for an IRA, too, which usually don't get a lot of perks. It's almost good enough for me to consider changing from Schwab, where you must manually buy and sell the money market funds as your balances change (they mostly discontinued sweep accounts after 2016). I registered a "complaint" with them, despite my 30+ year relationship, not that it will do any good.

Milwaukees Best Light said:

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How often do these things compound? If I see one that says it compounds daily, let's say 4 percent, does that mean that if I put in $100 on day one, I will have $103 on day two? And $106.3 on day three?

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spot on, so after 1 year his $125K turns into a cool $206 billion

hope it hasn't been sitting in the checking acct long..

JuanDurfel said:

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People love to hate on Robinhood; but I currently have a bunch of un-invested cash parked there as they are currently giving 4.15% APY if you have RH Gold ($5/month, with first month free).

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Why not just do that with Vanguard at 4.51?

https://investor.vanguard.com/investment-products/mutual-funds/profile/vmfxx