In this article, discover three smart strategies to invest your funds, combat inflation, grow savings, and maintain access for unexpected expenses with:
- Bank sweeps
- Money market funds
- Short-term CDs
During your working years, having 3 to 6 months of cash reserves on hand in case of emergencies or unexpected job loss is often advised. When retirement begins, maintaining a cash reserve is just as important, but having upwards of 12-24 months of expenses stockpiled can go a long way towards funding unexpected costs and avoiding drawing from accounts while the markets are down or if fees for withdrawing would be incurred [2].
The good thing is that cash reserves don’t need to be idle and can work to combat inflation.
Bank Sweeps
Once your bank account reaches a specified deposit limit, a bank sweep will automatically withdraw excess cash and transfer it to an account earning higher interest such as a high-yield savings or investment account [3]. These sweeps can also be automated to work in the reverse, ensuring you always have enough cash on hand as personal withdrawals are made.
Consider that fees may be incurred for both setting up these higher-interest accounts and withdrawing from them. It may be wise to speak with a financial professional to discuss whether or not a bank sweep is right for you based on your spending and financial situation.
Money Market Funds
Money market funds offer high liquidity through assets such as CDs and bonds. These products are great options for investors who may need to get in or out of the investment quickly by offering shorter terms and low barriers for entry.
Yields from these accounts are often minimal, but can be especially valuable for supplementing income in a high interest market.
Short-Term CD’s
Certificates of Deposit (CDs) can be adopted in terms of a year or less (or much longer). At times offered in intervals as low as 30 days (but with lower interest rates), a short-term CD may be beneficial for setting aside the funds you will use for a future planned expense, allowing for a bit of guaranteed growth in the meantime.
A CD is locked in until the term is ended or else penalties will be incurred, so a short-term CD can allow for growth while decisions are made about more permanent investments.
A financial professional can assist with determining how best to make use of your emergency fund and cash reserves in effort to combat inflation and accrue furthered growth while maintaining relative liquidity.
To schedule a complimentary financial review with Moore’s Wealth Management, click here or call our office at 770-535-5000, where a staff-member is awaiting your call Monday through Friday, 9AM to 5PM.
Sources:
[1] https://www.kiplinger.com/retirement/that-cash-in-your-emergency-fund-doesnt-have-to-be-idle
[3] https://www.kiplinger.com/personal-finance/banking/what-is-a-high-yield-savings-account
This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. Diversification and asset allocation do not assure or guarantee better performance and cannot eliminate the risk of investment loss. As with any investment strategy, there is the possibility of profitability as well as loss.
All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.
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