Cash Management Strategies; Revisited

As interest rates have fluctuated, we at Narwhal thought it would be a good idea to provide a refresher on helpful options to manage cash savings. So today, we wanted to provide some clarity on how cash savings options have changed since our last blog post on the topic roughly a year ago. When we last wrote our cash management savings blog post, 10 year treasury yields have risen from approximately 3.74% to 4.35%, making savings options all the more attractive.

Savings Accounts

Most people have a savings account but don’t know the annual interest rate with their bank. This creates an easy opportunity to research the market and move your savings account to a bank with a more attractive APY (annual percentage yield). Although Savings Accounts typically offer lower yields than CDs, they allow you to withdraw your cash at any time without penalty.

Certificate of Deposit Accounts (CDs)

CDs are investment products that pay a specified income rate on a lump sum of cash. Typically, they offer a higher interest rate than a savings account, but they are not liquid, meaning that your money is “locked up” for the duration of the CD (usually 6-12 months.) You can break the piggy bank early, but hefty penalties are typically involved. CDs are a great option if you’re holding onto cash you don’t need soon.

Money Market Funds

Money Market Funds are mutual funds you purchase through a brokerage or IRA account. These funds hold short-term investments like U.S. Treasuries and provide stable income to investors. You buy shares of the funds, receive income, and can sell them like any other investment. The rates are attractive but have embedded fees and often require a minimum investment amount. If you manage your own investments, Money Market Funds are a great alternative to keeping cash in your portfolio.

The rates above in our charts are always subject to change. We encourage all readers to verify rates with the respective financial institution before entering into a financial arrangement.