WSJ Your Money Briefing - Three Places to Park Your Cash for the Best Return

Episode Date: February 10, 2025

Looking to maximize your cash? Solid yields are still available from high-yield savings accounts, CDs, and money-market funds. Wall Street Journal contributor Lori Ioannou joins host Ariana Aspuru to discuss how to determine the best option for you. Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Americans love using their credit cards, the most secure and hassle-free way to pay. But DC politicians want to change that with the Durbin Marshall credit card bill. This bill lets corporate megastores pick how your credit card is processed, allowing them to use untested payment networks that jeopardize your data security and rewards. Corporate megastores will make more money and you pay the price. Tell Congress to Guard Your Card because Americans lose when politicians choose. Learn more at GuardYourCard.com. Here's your money briefing for Monday, February 10th. I'm Mariana Aspuru for The Wall Street Journal. If you're looking to get the best return on your cash, financial advisors say that there are three places to maximize your money.

Everybody's individual circumstances is so unique to their own needs, and their own cash needs and portfolio needs. Many people like to park their money in a high yield savings account because you get so much more for your money than just putting in a judicial savings account. And additionally, many people will put some money in money markets and a CD. We talk with Wall Street Journal contributor Lori Iannou about how to know which one is right for you after the break. Ready to make your next big move? Rotman Executive Programs at the University of Toronto offers top tier professional development. Whether you're moving up in your current role or preparing for the next, expand your business

acumen, sharpen leadership skills, and gain cutting edge insights from world class Rotman faculty. Accelerate your career with Rotman executive programs. Visit www.uoft.me slash rotman2025 to learn more. That's www.uoft.me slash rotman2025. As interest rates come down, the era of getting 5% yields on cash or cash equivalents, like CDs, appears to be over. But that doesn't mean you have to accept next to nothing on your money. Wall Street Journal contributor Lori Ayanu joins me. Lori, how much of someone's portfolio should be in cash? Cash or cash equivalents should range from 2 to 10 percent of one's portfolio as a guideline, but it can really vary widely depending on an individual's needs, financial advisors

say. What kind of things influence how much people have in cash? You need to have cash for key purposes as emergency funds in case of an unexpected circumstance like an illness or a job loss. You need it as liquid assets to tap for monthly expenses, loan and debt payments, and other personal financial goals. Your story discusses three good options to put your cash so that it can work for you.

The first one is a high-yield savings account. What makes a high-yield savings account a good option? There's a lot of competition amongst bricks and mortar banks, online banks, and other financial institutions to offer these deals to attract customers. Instead of just parking your money in a regular savings account, you can get a lot more bang for your buck

using one of these accounts. In January, the rates were high as 4.75% according to bank rate. So these accounts are federally insured up to $250,000 per bank, per depositor and account type. So you can have multiple accounts at different institutions and still get your FDIC coverage. And they're a good option if you need to access your cash on a regular basis, because many

offer access to ATM machines. Some allow you to link to checking in other accounts and know all the product features because there's downsides you should be wary of. For example, the yields on these accounts can fluctuate since they often move in tandem with short-term interest rates set by the Federal Reserve. Some are tiered so that only part of your balance, say on the first $500 or $1,000 or $10,000 gets the top rate and then drops after that. And some require minimum balance and have limits on withdrawals. So you really have to know the fine print.

Another option are CDs, certificates of deposit. Why are they an appealing savings tool for some people? That's a good savings tool if you want to set savings goals for the future because what happens is you're locking up your money for a period of time and it's not accessible. It's a fixed rate. They offer different terms. You can get three months, six months, one year, five year,

three year, and many financial advisors suggest using a latter approach when you invest in CDs. This strategy involves buying CDs with staggered maturities while keeping some funds accessible in the short term. So you can set one up very easily. For example, if you had $40,000 to invest, you could divide the funds equally into four CDs with different maturity dates, say three, six, nine, and 12 months. Who's best suited to go the route of certificates of deposit?

This is really for someone who is looking for a yield and is able to lock up a lot of money for a period of time. If you need your cash accessible always at your fingertips, this might not be an option for you. The last option you discuss in your story is a money market fund. This one seems a little bit more complex than the other two. Break down for me how this works. Okay, so these funds are different from money market savings accounts offered by banks. They invest in short term debt instruments issued by government and corporations

such as US treasury bills or commercial paper. They work like a mutual fund and they issue redeemable units or shares to investors. But a key difference is that these funds aim to maintain a net asset value of a dollar a share and earnings generated through interest on portfolio holdings are distributed to investors in the form of dividends. What are some of the pros and cons of going the money market fund route versus the other two we talked about? A lot of people like to invest in a money market fund just like they would a mutual

fund because they have a guaranteed rate and kind of a dividend check as well. And most people invest in it typically not for a long term investment strategy but for a short term strategy. It's really for the cautious conservative investor. Is it a good idea to have a mix of these different places to put your cash or is it beneficial for people if they just wanna pick one and stick to it, like high yield savings or certificates of deposit?

Everybody's individual circumstance is so unique to their own needs and their own cash needs and portfolio needs. Many people like to park their money in a high-yield savings account because you get so much more for your money than just putting in a traditional savings account. And additionally, many people will put some money in money markets and a CD. This is all for your liquid cash needs. How much

money do you need? How much liquidity do you need on a basis for what you need for your own personal life and circumstance? You need cash for key purposes as an emergency fund in case of an unexpected circumstance like an illness or a job loss Liquid assets to tap for monthly expenses. You know, you need your cash to pay your loan in debt payments and other personal things So what people invest in you know, if they can lock up some money in a CD, it depends on what they need the money for and how much access they need to the money. Remember, there's an opportunity cost for having too much cash sitting on the sidelines and not invested in other assets like stocks and bonds, especially when we see the stock market doing so well. So meeting with your financial advisor is always the great first step before deciding what to do. That's Wall Street Journal contributor Lori Ayanu and that's it for your money briefing. This episode was produced by Jess Jupiter with supervising producer Melanie Roy. I'm Arianna Asfuru for the Wall Street Journal. Thanks for listening.