About Ken Tumin

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Best Liquid Options for Your Money That You Want to Keep Safe


One of my friends recently inherited quite a bit of money. She currently has it in a Wells Fargo savings account which is earning very little interest. She asked me if I had any suggestions where she can earn more money. For others who might be in a similar situation, I thought it would be useful for me to share some of my thoughts on her situation.

My friend has always stuck with brick-and-mortar banks. Also, she's not a fan of online banking. She might be willing to give internet banks a try. Also, she likes to keep her finances simple.

She does have a Fidelity brokerage account. Most of the money she has at Fidelity is in an IRA which holds stocks and mutual funds.

Her future plans for the money she inherited is to invest it in real estate. However, she doesn't have any immediate plans for the money. She just wants to keep it safe and accessible so when an investment opportunity arises, she can jump on it.

First, I broke the bad news to her that in today's awful interest rate environment, there's no way to earn "high" yields and keep it 100% safe. I'm not sure how much money she has, but it's over $100K. So it will still be worthwhile to move the money from Wells Fargo. Even if she can earn just 0.50%, that's an extra $500 per year assuming a $100K balance.

Reward Checking Accounts?

Since she has over $100K and she wants to keep things simple, I don't think a reward checking account would be a good choice. If she doesn't mind the work, it may be worth it. I have more details about reward checking accounts in my post 10 Common Traits of High-Yield Reward Checking Accounts.

Internet Savings Accounts?

An internet savings account would be a better choice if she can learn to like online banking. That had me thinking about which internet bank would be best. Should I suggest the top internet banks that currently offer at least 1.00% APY? As I mentioned, she likes to keep things simple so she won't want to jump to a new internet bank every six months.

I currently have 7 savings and money market accounts in my latest weekly summary which offer at least 1.00% APY. What concerns me about them is the question of whether they will remain competitive for the long-term. Three out of these seven are only intro offers with rates that will definitely fall within months. These are Flagstar Bank, EverBank and Salem Five Direct. Two of the seven are new internet banks, TIAA Direct and Barclays, so it's questionable if they'll remain competitive in the long-term. That leaves MyBankingDirect and Incredible Bank. MyBankingDirect has been around since 2005, but it doesn't have a long history of top rates. Only in the last year has its rate been near the top. Incredible Bank was launched in 2009, and its checking and money market accounts have remained very competitive. So out of these seven internet banks, I would give the edge to Incredible Bank.

There are a few internet banks with rates that are not quite in the top bracket, but they have a long history of competitive rates. Also, they have a long history of good customer service and solid internet banking features.

One isn't an internet bank, but it's a lot like an internet bank with a solid online banking interface. It's Alliant Credit Union. This month its savings account fell out of the 1.00% club when its yield fell from 1.00% to 0.95%. Its rates have a long history of being competitive, and many readers have been very happy with the credit union.

One internet bank that can be included in this list is ING Direct. Its online savings account has a long history of being fairly competitive. It has rarely been in the rate leader group, but it has never been uncompetitive compared to other internet banks. Also, for those who have at least $100K, you can receive a higher rate with its Electric Orange checking account which offers higher yields for balances of $50K and $100K.

Another good option is Ally Bank. Like ING Direct, its savings account has a long history of being fairly competitive. Also like ING Direct, it has good customer service and many solid internet banking features.

Certificates of Deposit?

One advantage with Ally Bank over ING Direct is that its CD rates are more competitive. In addition, my friend may find Ally Bank's 5-year CDs interesting. As I mentioned, she doesn't want to be locked into a CD. However, Ally Bank CD's have an early withdrawal penalty of only 60 days of interest which reduces the risk of being locked into a CD. If she needs the money just 4 months after she opens the CD, she would lose just half of the accrued interest. In that case, she comes out better than if she had just kept the money in Ally's savings account. I've reviewed the risks many times of planning for an early withdrawal from long-term CDs (see blog post). One way to reduce the risk is to split the money between the savings account and CD. Also, it can be helpful to open multiple small CDs rather than one big CD. The reason is that Ally doesn't allow for partial early withdrawals.

Short-Term Bond Funds?

Finally, there is one option that may interest my friend who wants to keep things simple. Since she already has a Fidelity brokerage account, she may want to consider short-term bond funds that she can get without transaction fees at Fidelity. Unlike bank accounts, these have no FDIC protection. Bond funds have interest rate risks. Some principal can be lost if interest rates go up. Short-term bond funds help reduce this risk. Also, there's the risk that some of the bonds in the fund could default. If she is willing to accept these risks, she might consider a fund like Fidelity Short-Intermediate Municipal Income Fund (FSTFX). Its current 30-day yield is 0.80%, and its tax equivalent yield is 1.23%. You can see its performance history at Yahoo's Performance page of FSTFX. Since 1987, the only year it had a negative total annual return was in 1994 when it lost 0.08%. As with any mutual fund, its history is no guarantee of future performance.

Bottom Line

As I first mentioned to my friend, there isn't any safe investment with high yields in today's awful interest rate environment. Nevertheless, she can definitely do a lot better than keeping her money at a megabank savings account. What suggestions would you have for my friend?

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Previous Comments
  |     |   Comment #1
How about opening a few penfed 7 year cds.  The penalty for cashing out early is 1 year, and you can't get back less than your principal.  She will earn 2.5%/year.  So after 2 years if she decides to cash out, she would get an average of 1.25% per year which on 100k would be about 2500 bucks.  And this cd is fully insured by the NCUA.
  |     |   Comment #2
I wouldn't plan on an early withdrawal strategy from CDs if you want guaranteed access to your money. As we have seen lately, banks and credit unions can, and have, changed their rules regarding early withdrawal, and the FDIC and NCUA don't seem interested in stopping them from doing so. I agree that your friend should dump Wells Fargo, but what about checking out the community banks and credit unions in her area? If she is willing to travel some distance, she might find an account offering a rate close to those being offered by online banks, and maybe even better! With 100K or more, I would think her chances of finding something attractive in a "brick-and-mortar" might be reasonably good.
  |     |   Comment #3
FSTFX is a good choice. Annual Total Return is obviously based on Jan 2 and Dec 31 of the year so when and on what days of year the FSTFX is purchased and sold are very important in determing the actual return.

Another way of looking at it is to add up the number of quarters in the table below that FSTFX had a loss (a total of ten - relatively small number compared to many others).

Thus FSTFX is a good choice but a little bit timing of the market is a must: for example, you don't want to purchase it on a day like today that most stocks are trading low and most bonds are trading high...
  |     |   Comment #4
Most credit unions don't pay any better interest than banks.  It's a war against savers!
  |     |   Comment #5
Credit Unions were paying a bit more but lately I have noticed they are not doing any better than banks with rates.  It's like we have been thrown over a cliff with interest rates!  No place to go!
  |     |   Comment #6
There are no good options......and any of you that think rates are going back up......no way. They are permanently low. In fact.....we may even see the first negative rates. Banks will charge fees and/or negative rates just to hold your funds. Interest rates cannot.....by definition.......ever go up again. The debt will collapse our society if rates go up. It's over. 0% chance of rates going up.......ever.
  |     |   Comment #7
Wow #6 that even made me depressed
  |     |   Comment #8
I would suggest allocating at least a part to P2P lending (e.g. Lending Club: http://www.lendingclub.com/). It is not difficult to get 9-10% return annually; invest in notes above 15% returns, and at least 400 notes (e.g. with 100K => $250/note or less). Even with a default rate of 4-5%, the return will be about 10%.

The downside is that a portion of the money is locked up for 3-5 years, but she will receive a steady income stream monthly (return of capital and interest)

  |     |   Comment #9
p.s. Lending Club also offers IRA accounts so the partial lock up may, in this case, be irrelevant.
  |     |   Comment #10
"but she will receive a steady income stream monthly (return of capital and interest)"......or not. It seems to me the premise of the advice was a SAFE place to park the cash with LIQUIDITY and I suspect Viking's suggestion offers neither.
  |     |   Comment #11
If #6 is is correct, then economics theory would strongly suggest that we all purchase rental real estate.  Rental real estate will give off a return for a given investment, and that return should grow over time.  For example, why put $200,000 in a CD which pays 1%, or maybe "0" someday as per the reader, when you can buy a property and get a net return after expenses of 3%-5%?  And since rents will rise (or can be increased) with inflation, the % return should be protected.  I'm not advocating this strategy, but "0" returns on savings point right to it.  I have a Masters in Economics so I studied this.  Still, I have no idea what will happen.  But if we really do have zero deposit rates, that scenario strongly facors real estate.
  |     |   Comment #12
#11-Karen has an interesting point.  Why lock up hundreds of thousands of dollars at little or no return, when you can just buy a house or two (maybe without a mortgage) and rent it out?  The local rental market would have to be decent.  I'm tempted to do the math on this for my area.  The other thing which she neglects to mention is that the house could conceivably go up in value, besides the rents.  It could go down also, but there is probably upside at this point in the economy.
  |     |   Comment #13
Well, if low rates are permanent then equities would be the way to go. (there is empirical support that they are correlated) 

You can even see that equities have already jumped back to pre-crisis levels.

But, I'm willing to bet all my money that rates will go higher at some point. (although, probably not in the near future) Debt is high but the ratio of debt to gdp isn't uncontrollable yet.

Or you can hold commodities as they are traditionally used hedges against inflation.
  |     |   Comment #14
i think its investing in duplexes.  Pay yourself first strategy.
  |     |   Comment #16
Wow! #6  Talk about making me nauseaus!  Why don't you say something cheerful like the world is really going to end this year and we don't have to worry about interest rates OR rental properties?

Interest rates will never go high again but I don't agree they will it to the point that #6 envisions in his nightmare.   If his scenario comes true, our economy and life as we know it is gone so why worry about anything!  Also, if you ever had rental property, you would know what Hell really can be like!  Now "that" is worse than low interest rates to me!  People who trash your property and then run out on you in the middle of the night without paying for rent or damage.  It's good for taking a "lost" on your taxes but as for making money??  You better get expert and professional advice before you take that on, imo.  It's not as simple as some make it sound.  I'd rather sell bananas on a street corner first!

Cheer up folks!  As they say "What goes down has to go up".  If you believe that you must be relatives of #6! 
  |     |   Comment #17
If the funds are needed within the next five years then safety is the primary focus. Find a local bank or credit union and place the money in a FDIC or NCUA insured deposit account. Checking, savings, money market or even a short-term CD would be appropriate. Rates are so low, and forecast to remain that way for the next couple of years, so customer service and a good financial rating are what to look for in an institution.
  |     |   Comment #19
I'm making 5.5% on a very simple 2 family house.  No headaches.  My investment is $140,000, if it were in a CD it would be throwing off $3000/year tops.  This house nets me about $7500, and there are write-offs so it's actually more.  I'm in an area with good demand for well-cared for apts., never a vacancy more than a week, I do a credit and prior-landlord check, never had a problem, get plenty of security and rent up-front.   To give the money to a bank, imho, and get pennies is not for me.  By the way, I'm 67, female, single, can't do any repairs myself really.  I will pay a local plumber, yard man, etc. and it still pays to have this an investment rather than a CD.  I use bank deposits for short-term liquid funds and other assets.  Just my experience, I'm not a real estate expert.
  |     |   Comment #21
#19  Be careful saying you are rich and "single" on this forum.  DE Nada is still awake!  Just kidding.  You seem to have gone about the rental property thing in a professional way and I'm glad it worked out for you financially.  However, not everyone understands they have to do their homework if they want it to work out.  You also lucked out in a way because even if you check people out, you can always get bad apples. 
  |     |   Comment #20
De NaDA:    I'm sorry you and I had same bad experiences with rental property.  I knew we had a "connection"! :)  BTW,  I was just eating a day old dried up roll and you had to ruin things by mentioning "cherry pie and grits!!!"  I should stick Fluffy on you!  Where is the South when I need her??
  |     |   Comment #22
To Anonymous #19:  I am not "RICH" by any means.  I just put my funds in a rental house instead of CD's.  I scrimp and try to save and am being hurt very badly by inflation to put gas in my car, buy groceries, medicines, etc.    Not rich at all.
  |     |   Comment #24
#22 Helena:  I was just kidding with you.  DeNada is just a regular member here and very nice.  I don't think anyone is lurking for somebody else's money.  We just post here to find ways to do better with any we "might" have.    BTW, just a hint.  You don't have to post your real name.  That is why we use numbers or we go by fake names.  This is a very helpful group and you sound like a lady with a lot of wisdom so I hope you will be around for a while to share with us and learn.   These are very hard times for many due to the economy, imo.
  |     |   Comment #23
I meant to reply to Anonymous #21. Sorry!

--Helena Torrick
  |     |   Comment #25
Maybe a bit off-topic: Everything in this world  is a trade-off.  I was a landlord for about ten years.  It was definitely not free money.  We have a nice house with a monthly rent at $4K - $5K.  No matter how careful we screen our tenants, there were difficult or picky people to deal with.  We had the sense that tenants might call us with problems/issues all the time (not that they did).  We had the sense that the house no longer belongs to us - ongoing damage could be done by kids/guests.  There was a period of 3-4 months that we could not find tenants.  There are rental income and tax advantages.  But we decided to take it back for our newly-married daughter to live there.  At our age, we choose peace and joy of life vs. financial gains/associated anxiety.  It is well worth it. 
  |     |   Comment #26
To:  Helena and All:  Helena you seem new here so you may have missed Ken's post about a Saver's Petition recently that a caring person put up on Save.org to help herself and the rest of us who are suffering with these drastically low interest rates.  Would you please read it and consider signing it to help us get it to Washington and the FOMC?  This is an election year and even if we can't get higher interest rates, we need to let Washington know we won't take such actions against us financially without "voicing" our anger in this Petition and at the Polls.  We need 5 (FIVE) more signers to reach our next goal.  Will you and any one else reading this who hasn't signed yet, PLEASE, help us and just share your signature on our Petition.  Some people have also posted their feelings and it is sad to read how much suffering is really being caused by Washington's Zero Interest Rate Policy which isn't even working!  Thanks for any help you or any other poster will give us.  The Petition can be found by clicking on:


Thanks for ANY help! 
  |     |   Comment #27
I agree with 51hh's post (#25) about staying away from real estate...to a point.   There may be some "anxiety" associated with owning rental real estate, but there is also real anxiety associated with getting 1%-2% on your savings in a CD.  My aunt and uncle are in their 70's and now unable to pay their bills due to this.  They saved and sacrificed for a long time and now are being victimized by the banks and Fed.  The stock market was and is not for them.  If they had a rental house yielding 3% to 5% it may have helped.  I guess in this economy, with such paltry deposit rates, one must choose their anxiety.
  |     |   Comment #28
I agree with 51hh.  I also had a very nice rental property and screened tenants carefully.  Some were wonderful, others were a nightmare.  Some months the property was vacant, but the mortgage still had to be paid.  In the end, I broke even but vowed "never again".    IMO it is possible to do well in real estate, but you increase your chances of success and profit when you have multiple rental properties, not just one.

I also agree with Jennifer (#27):  in any (and especially in this) economy you pick your anxiety.  Success in real estate is not guaranteed.  Her aunt and uncle might have used part of their funds for rental properties, and had tenants stop paying their rent.  Eviction is a slow process and is not free.  If the property was still mortgaged, then they would have to pay that monthly bill out of their own pocket.  If the property was owned free and clear, then there would be no income while the eviction was proceeding (and likely for some time before).  That could easily wipe out any advantage over a 1-2% account. 
  |     |   Comment #29

The thing is, though, that many of us have to be more "imaginative" with our savings if all we can get is 1-2%.  To give up the use of $100,000 on a long-term basis for $1000 or $2000 is just plain unacceptable.  If there exists a reasonable option to buy a rental property and receive $3000 to $5000 net, I think that should be explored.  I am 78 y.o., have one three-family home and yield about 4.5% on it.  No mortgage, it's only worth about $145,000 so I own it free and clear.  If you are careful, get good security, etc., check references, have a good local attorney to draw up a lease, etc. and pick your location/property carefully, it's a high likelihood of turning out fine.  There are horror stories, but there are many more success stories that you never hear of.  There are plenty of good tenants out there also who appreciate a fair rent and a well-cared for place to live and stay for a long time.
  |     |   Comment #31
Saul, I agree that giving up long-term use of $100K for an annual $1-2K is not ideal.  I appreciate your encouragement and am happy that your experience has been positive and profitable.  I also had good security, a strong lease drawn up by an attorney, a prime location in a top-rated school district, and thoroughly checked references.  However, my story has a different ending. 

My first tenant was an angel:  took excellent care of the property, paid promptly without problems and gave me plenty of notice that she was applying for a transfer with her company.    Unfortunately despite excellent references, the second tenant was a nightmare for a number of reasons.  I did not fall into the trap of renting to the next person, but continued my process of careful vetting.  The third tenant turned out to be a nightmare also, and in the end I paid two mortgages (my own and the rental property) for several months while also repairing damages not covered by the security deposits.  

You are also right that one only the horror stories get press.  While I am grateful for the lessons learned, having lived through two makes me reluctant to try it again (once burned, twice shy).  
  |     |   Comment #32

Understood.  We are all a sum of our experiences.  That is why I stay away from the stock market.  Good luck to you and bless you and your family at this holiday time.  Hopefully economics will improve for us all going forward.
  |     |   Comment #33
Thank you Saul, and the same good wishes and blessings to you and yours.  I pray by next Easter things will be better for all of us.  Thanks again for your encouragement on real estate. 
Priscilla (fla.)
  |     |   Comment #34
The thing about real estate is that it is an "equity," that unlike the stock market, you can see and touch and most people can understand.  If it is necessary for us to consider "equities," other than cash or CD's, I'd rather take my chances with a $100,000 rental property vs. $100,000 in stocks.  The $100,000 in stocks can become $95,000, $90,000, or...$0 very quickly, a matter of weeks, months.  I had $10,000 in bank stocks, they on average paid a 5.25% dividend, it is now worth "$0"  (large banks, taken over by the govt.)  A $100,000 rental property, just as an example, is much more tangible and stable.  I guess that gold is more solid than stocks also, but it does not throw off income which makes it not for everyone.
  |     |   Comment #35
I think we have wandered away from the original topic (best liquid options for your money that you want to keep safe), but it has certainly been a very interesting discussion.  One thing is certain:  there are no perfect answers. 
  |     |   Comment #36
Safe and simple? OK.

I'd go half into Ally's 5-year CD and half into Ally's 11-months no-penlty CD for it's guarantied %0.93

First half will earn higher interest, but has an off chance of problems if your friend would want to cash out early. The second half would earn measely %0.07 less than leading saving acc, but the APY is guarantied for 11 months.
  |     |   Comment #38
borodarda - #36, Tuesday, April 10, 2012 - 11:44 PM

In for $550,000.  3%-5yr, 11m- recent rate.

The best "backyard" i could find to bury it in.

Got top bunkbed so no mattress safe.

Waiting for that eventual rainy day. :)
  |     |   Comment #39
What about something called "Structured CDs?  Has anyone had any good experiences with these?  My bank sells them but I have never used them.  Thanks for any info.
  |     |   Comment #41
Pearl:  Thanks so much for the article.  It had really good info and agreed with a lot of the other articles I have been finding.  The finance guy from my bank called and when he realized I had already researched Structured CDs, he was very kind to agree with me that they were not my type of investment.  I gave him questions to answer and surprisingly, he gave me same answers as I had found in articles.  It was good to find him to be so honest with me.  They just are not for me at this time.  Thanks so much for your help!

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