Also note that fees vary, but there are plenty of no-fee options. Most of these accounts are insured up to $250,000 per depositor per bank, but you'll want to verify the bank is covered by FDIC. Deposit minimums vary but many have no minimum balance and there is no fixed term. The highest yielding accounts are offered by online banks with little or no physical infrastructure and may allow for a limited number of transfers per month or even debit card access. Today a variety of institutions offer accounts that pay competitive variable interest rates of 3.5% to 4.5% on deposits with relatively few restrictions. Forget the traditional passbook savings account. Here are a few of the more attractive options. The internet and online banking have also expanded the opportunity set. Thanks to the evolution of new financial products and changes in banking and securities regulation, investors have more choices today and these options are considerably more flexible than available a decade ago. This inversion of yields is often a harbinger of an impending recession but presents savers with the best of both worlds in the here and now. Today, rates of return on shorter-term investments are considerably higher than long-term rates, a sign that markets expect interest rates and inflation to decline in future years. Ordinarily, one would expect a higher rate of interest on investments with longer maturities, forcing savers to confront a tradeoff between liquidity and yield. In addition, the interest rate market is in an unusual state called an inversion. Today the available choices are more plentiful and rewarding. Until recently, that has meant paltry or near-zero returns. Investing for more distant needs like retirement allows for a greater degree of risk in exchange for higher long-term reward, but near-term savings should be allocated to vehicles that prioritize safety and liquidity.

Today the landscape has changed with the Federal Reserve raising interest rates and inflation beginning to abate, providing individuals with an array of options for stashing their cash while earning a respectable return.Ī general rule of thumb is to consider as short-term assets any funds that may be needed in an emergency or are dedicated to a specific expenditure within 3 years or so. Just a year ago, one would be hard pressed to exhaust a paragraph, must less an entire column, on where to find attractive returns on cash balances.

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