The Only Safe Place to Keep Cash (With high interest!)
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- เผยแพร่เมื่อ 13 พ.ค. 2024
- How to Bypass the Banks and earn high levels of interest on your cash.
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0:00 Intro
1:46 Bank Crisis
4:38 How banks make money from you
5:15 How to bypass the banks
8:36 Benefits
8:59 Drawbacks
10:21 Use Cases
What do you think, will you be using Money Market funds?
Probably - do money market funds earn considerably higher interest than high-interest/low-service online banks? If so, it seems like it would make sense to put some of my emergency fund into a money market fund. My emergency fund is currently 6 months of income, but I would only need to get one month at a time; so delay in accessing the remainder should not be a consideration. That being said, I currently have the emergency fund spread across two savings accounts at two high-interest internet banks, so they are already making a little under 4% interest (I'm in the States).
@@cisium1184 Here's the index for the overnight rate in the US: www.newyorkfed.org/markets/reference-rates/sofr
You can always hunt around and find good offers for savings accounts, some of which may be better than this rate. But they are often capped out at a maximum value. I personally don't have the time/patience to shift money around all the time so these funds work well for me.
Have been for the last 6 months.
I parked some money inside an actively managed money market fund inside of a Mercer Master Trust pension. I was considering trying to time the market (bad idea, obviously) but then decided it was better to buy units of a passive index over 15 year gilts fund. My natural inclination is to invest in equities, however trying to temper that due to being 53 years of age. Anyway, Jack Bogle's books suggest that asset allocation is a key component of an indexes mutual fund strategy. However, it does not look like a one size fits all kind of scenario...
No - not for me, for various reasons.
Banks stopped being relevant to small businesses back in the 1990s. In our town, many banks cut credit lines. Then five years later they begged those small companies to barrow. It was too late, times had changed and business plans had changed as well.
keep in mind that regulated banks are insured by FDIC (CDIC in Canada). Money market funds are not insured.
I think you're missing another reason for low bank interest rates: they don't need our money to lend to others, they can get it from the central bank instead. This is one of the two bad changes to come out of the 2008 crisis (the other being massive money printing).
Yes you’re right, it’s called quantitative easing (empty money)
It should be noted that Inter-bank lending is a contagion parameter when one bank collapses.
QE isn't even the biggest issue. Its the fact that they need 0 proof of reserve anymore thanks to Trump's removal of the reserve limits. So they don't need to prove they have the reserves available for you to withdraw, which is how money is actually printed now. The govt has very little power when printing to affect inflation anymore thanks to this.
It also means that we have 0 safety net because our jobs are at risk with banks failing due to lack of reserves.
@@puffingtonsmythe8690just print it up, but it's all just a giant ponzi scheme that USA is dependent on keeping everyone in debt or it all falls
Another fantastic video - I always learn so much from your content. Thank you.
(FYI - there’s a blank section with no video - just sound from 4:24 - 4:35 you might want to sort. )
Thanks James for a very timely video. Especially the last comment...
This channel is so helpful. Thank you.
Your channel is really really really important for everyone alive!
Thank you very much for explaining Money Markets, and so well. I keep hearing them mentioned, especially in US vlogs, but this is the first time I have fully understood what they are.
Thanks for this important information. We are lucky to have you.
Hey, great information thank you! Please can you put the Next Video link in the description? On my device the in-video links don't even display so I have no idea what video you're directing us to
This is the video I needed right now. Perfext!😊
Sounds perfect for an emergency fund! Thanks, I was looking for something like this ❤ . Cheers
You're welcome.
Crisp and concise presentation... I am a subscriber
Really really helpful vid. Thx a lot. I have a house deposit sitting doing not very much while we try and find a house.
Great never heard of them before your video thanks 😊
Great video brotherman. Thanks for teaching me this. I have always been looking for ways to step out of the big banks
Thanks James!
thanks James was looking for a safer way to store cash in my ISA and SIPP and wasn’t aware of these funds
Thanks James 😊
Please can you do a video about pension recycling?
With how prestigious Lloyds presents itself to be, they sure do screw over the people that they call customers.
Very helpful reminder & great coverage of the pros & cons of MM funds. Thank you,
Thank you for your time.
Thank you for your insight.
Thank you James ... another excellent video - Very informative.
Very welcome
Good stuff! thanks
Thanks for the video James! Extremely helpful 👍
Glad it was helpful!
Any good way to earn more than 3-4% on idle cash with virtually no risk right now? Willing to lock up for up to a year or so if needed. What are good options? I have about $173k retirement funds that i want to grow.
Is this a real question? Buy T-Bills?
Anyone have recommendations for a reliable monthly investment? I hope to ultimately supplement my income from work with a monthly income from investments. I will still make long-term investments, but it would be wonderful to have a little additional money each month.
@@kashkat987 My investment advisor, "JILL MARIE CARROLL," a US-registered CFP who you may have heard of or seen on the CNBC news, uses trade signals to help me diversify my money well, and I must admit that it has been a big comfort. Highly diversified portfolio, incredible profits, and minimal to no engagement on my part. Having grown by 20% on a monthly basis, my portfolio generated a $450k return in 2022.
@@Ammo-Hoarder Do you mean to mimic her trades as they are made in Etoro when you say you would use trade signals from her? I hope I'm not required to give over my money. I just looked her up, located her website, and read through her qualifications and resume, all of which seem excellent. Does she have a minimum to work with?
I can't give anyone my money, so I'll caution you against doing so. My account only mirrors her trades, and I have no idea if she has a minimum, but you may get in touch with her through her website and find out.
Great information, well done!
Nice once again.cheers
Great video James, I may move part of my emergency fund into a money market fund while interest rates are high.
Hi James, could you do a video about protection of shares and EFTs in ISA S&S ? I tried to looked up if the £85k protection from FSCS and FCA covers shares and ETFs and it is not really clear for me if this is, in terms of company / funds going under (not investment risk itself). There seems to be some niuance about the fact if you received "advice" to invest or not. Will be great to hear it from trusted source. Love your content. Thank you.
Very interesting. Thank you.
Great Video James, Potentially another investment in my 'play portfolio'
I get 4.7 % from a fixed term in the bank paid monthly interest, quite happy with this and another account I get 5.5% but thanks for covering MMF's never knew about this before.
Great video, learnt something new for sure today. I am saving for a mortgage so this is very relevant, thanks!
Glad it was helpful!
Thank you. Do money market funds compound interesrt? if so how often typically?
Great content James, as usual!😊
Glad you enjoyed it!
Good video. I think I’d use one in my SIPP when and if I decided to convert it, or part of it, to an annuity to avoid any last minute market changes affecting the annuity income.
Hi David, I can't say if that is suitable for you specifically but that is often a valid use case.
Another fantastic educational video. Thanks 👏
You're welcome!
Agree James I would just say that the funds will yield 4.3%, if you deposit in an ISA for example aj bell will take in total cost 0.52% annually) you’re slightly better off than an easy access at 3.4%
Hi Phil yes, it will depend on which broker you use. Some charge fixed fees other %'s that top out at a certain level.
Good video. I’ve subscribed. Good idea to invest in MMFs within an ISA? Or would platform fees and/or other charges negate any tax benefits. I hear what you say about these being generally of a short term nature…
Thanks James. I always wanted to know about Money Markets.👍
Hi James - long time watcher, first time commenter! Contrary to your point about the large banks, JP Morgan Chase (UK) actually have a really good savings interest rate at the moment with 3.1%.
Hi Cam
Thanks for the comment!
That is true, although in the UK Chase is more of a challenger bank that has to offer high rates to attract new deposits. It's established in the US but not in the UK.
Hey James, great video. Whats a good money market fund in EUR?
Good info, food for thought.
Nice video. And OMG - a new room! 😁
Very useful. I tend to mix easy access with fixed term accounts. Had never considered MMFs before, I guess partly because rates have been so low for so long. Thanks for enlightening me! This takes the effort out of chasing the best (altho I take your point about it being less useful in a falling interest rate environment...)
Money Market Funds are Not secure unlike a Money Market Account is insured by the F.D.I.C. !! You can lose your money in Money Market Funds !! This is something you really need to study on before doing anything !!!
@@zakman9244 doesn't bother me. Particularly the US-centric FDIC insurance
THANK YOU
I don’t understand… in the last week one of Australia’s top banks have pulled cash completely, no deposits no withdrawal and as I believe it’s not the only one in the world ?????
Thanks James. Really good video. I've been hearing about these Money Market Funds, but wasn't aware that they were available in the UK!!
No problem!
Great work James - I think I'm pretty savvy when it comes to my money but I haven't heard of this before! Worth noting that if you're a higher rate tax payer, unless these funds are held in a tax wrapper (like an ISA) then Mr Tax Man will get a decent chunk of those rates! This is therefor ideal timing as the ISA allowance for 23/24 has just reset! whoop whoop!
The tax man will always have his fill. But yes you can buy these funds in an ISA too.
Just in case you weren't aware it hasn't reset yet, it resets on the 6th of April. I don't want you accidentally over filling your annual ISA allowance and having to pay tax down the line.
@@MrLaughinggrass good point - I nearly missed that!
My understanding (UK).... if you were to own 'shares' in an Accumulating Money Market Fund then the tax you pay is CGT upon disposal. If you were to own in an Income MMF fund then you pay tax on the monthly income each tax year and the income is treated as Interest income. This feature gives you some more options, if you are investing outside a SIPP / Isa. Choose your share class accordingly!
ISAs are pointless. There's other things like luxury watches that will give you a better return and even outperform property.
So useful for me, James. I’m on the verge of buying my first house and have a load of cash that I’ve freed up in my LISA. This will be a good place to park the cash in the short term
MM funds can be useful if you’ve got your cash inside a tax wrapper like this and therefore can’t get access to normal savings account rates.
Interesting video for sure. There are a ton of easy access savings accounts in the UK offered by named providers over 4%. Unless the interest difference is huge im not sure if this approach is qorth the hassle at the moment. Still, its something i wasnt aware of so appreciate you taking the time to educate us.
Thanks for this James. I always wondered why someone who invest in a money market fund
Great stuff, just the video I needed. You been Skiing James? You look like you've caught the sun!
I have, Ischgl in Austria! It took me a week to recover...
@@JamesShack nice.
Hi James, is there a Sterling fund that is government backed only? Ultra short term government bonds only
Please could you say what amounts you need for these funds, and where to find them? Thankyou
It's tempting, but just last week the FT was writing about the US Treasury warning about structural vulnerabilities in money market funds. I think I'll stick with FCA covered cash savings instead of possibly losing a painstakingly saved house deposit.
This is prudent and sensible.
Many of these alternative off market schemes are scams.
Was
Lyxor Smart Overnight Return - UCITS ETF C-GBP (the "Fund")
the fund you mentioned in your second example ?
When there are high yield savings accounts that give 4.29% APY and the deposit is insured by FDIC why would i bother for the added hassle its not worth it.
Hi James, as always great content.
My Mrs and I have been trying to get in touch with your business to get financial planning/advice but haven't been able to do so.
We completed the questionnaire, as well as filled the form. Is there an easier or more direct way to book the appointment?
Please let me know, thank you.
Hello! My diary is often back up, but you should be able to book some time to speak with my team through our website: octopuswealth.com/
Great video! Going to park the emergency fund in one of these. Cheers 👍🏻
You’re welcome!
Why not just put your money into the smaller bank with the higher interest rate?
I haven't used banks for years. I use only Credit Unions. Anything that uses stock market in any way, it could drop like a rock and you lose it all or most of your money.
Investing in the stock market is for the medium to long term. Everyone has a different attitude to risk. The stock market will have ups and downs, but you need to ride out the downs - you lose money if you cash in on a down, you make money if you cash in on an up.
If you think that banks take depositors money and then lend it out, you’re still working with primary school thinking... that’s clearly not how it works with fractional reserve banking.
Hi James, if i'm looking for a MMF or ETF in GBP, which invests in gilts / treasuries, what the best way to draw up a short list? Thanks
That was enlightening for those who don't know indeed , on the other hand i've never been so open to the concept of interest on cash i personally prefer direct capital profit on cash therefore i've never cared about how much interest i'll be getting from a bank as much as i care about keeping the cash safe and secured and that's the ultimate use of a bank to me personally but thank you for sharing
But income earned from MMFs wouldn’t be treated as savings income so you might be taxed on it depending on the person. Still a great choice given the differential in rates but something to be aware of all the same.
Considering using these in my LISA on Hargreaves. But, feels like a stupid question. Where do I see what dividend/interest the fund is paying? Can't find anything. Any other HL users know?
Good work. I use premium bonds as my emergency fund currently
Bad idea!
I did that for a while between houses as I didn't want to lock my cash, worked it out afterwards the small wins meant I got the average return with a small chance I could have (but did not) score a big win.
Premium bonds are a very clever way to get people to save more (because they know we all love a lottery). Still, the problem is that - just like all lotteries - they are not as good as you think, and people hold onto Premium Bonds when they should instead be investing for the long term.
The average yield at the moment is 3.3%, but that is the "mean" which is heavily skewed by the £1m winners.
The average (median) yield is either 0% if you have a small amount or just 2.55% if you have the full £50,000. See here: www.moneysavingexpert.com/savings/premium-bonds
Yes, that yield is tax-free, but most people do not max out their ISA allowances any way, which would be a more reliable alternative.
Don't get me wrong, I think they are a clever way to get people to save more, and they can be useful to park your emergency fund or money you need in the short term. However, people often hold far too much in them when they should really be investing for the long term.
Does this apply to the American financial system?
Not sure if its because this video is 5 months ago, but if you are based in the UK, there are a lot of easy access savings accounts now that have the same or slightly more interest than most MMF. And it will be protected by the FSCS too
I have a 5 yr fixed isa over 5% interest.
Gold … a hedge against inflation is obviously higher return than interest offered by anyone right now 👍
With MMF - when interest pays it gains and next day it went back to minus than investment amount. Does it mean investor has to sell every time interest pay and buy again after ?
And also Gold bars Silver. Platinum and Palladium precious metals people are switching to. Profit wont been seen for approx 5 years but Gold has risen in value regardless of what currency is doing and banks are buying large amounts too
You should do a video for what you put your cash in when rates are getting cut and overall low.
How much money do you need to save for emergency savings? 3 months or 6 months in cash?
Thanks
Thanks, very interesting. The current interest rates offered by most high street banks are a joke compared to what other offers are out there.
High James. Great content. I have some cash in my Hargreaves Lansdown SIPP. Is there a MMF that HL offer. I am happy to park for 6 months to 12 months but looking for low risk. many thanks
Hi Philip, yes there are quite a few. If you go into the fund search and filter by sector you can select Money Market Fund. However, many funds are ETFs, like the Lyxor fund in this video so won’t appear in that filter. You need to search for them in the shares/ETF search.
Sorry for the very basic question but where can I buy those Mmf? Are they in Degiro? (I'm based in Ireland so looking for euro MMF)
Hi James legendary channel and thanks for the posts what you are doing, helping people with pensions and planning tips is invaluable. I had one question on your money market fund in terms of putting spare business cash into one. Wouldn't you pay capital gains on money invested into one of these funds therefore reducing the effectivness of this as an investment for short term?
You would pay corporation tax on the interest income, just like with a bank account.
can someone link the video mentioned at the end, I don't see it. Thanks in advance
Some of the bank savings accounts are not that bad. Club Lloyds Monthly Saver offers 6.25%, Monthly Saver 5.25%. Santander Edge Saver 7%. Santander Regular Saver 5%. Edge Up Saver 3.5% on 25k. Nationwide is offering 8% on a limited amount of savings. Leeds, Aldermore, Skipton, Marcus, Cynergy Bank etc all offer 4-4.7%. All of these are easy access accounts.
Hi James. Really enjoy your videos. I notice in a reply to a US contributor, you made reference to SOFR (the US equivalent to SONIA). Are you aware of any MMFs available to UK investors that attempt to track the SOFR. I've failed to find any ...
I'm not, but I haven't looked. You might be able to find a US fund that is hedged back to GBP.
This is very timely as I've just been researching mm fund. Would it be a good idea to put pension contributions into a money market fund as you get close to retirement in order to benefit from the tax advantage but minimise the risk of markets being down at the point you retire and want to draw some cash from the pension? Thanks.
That is a potential use case, yes. Although I can't say whether it would be suitable for you personally.
I have a SIPP with Charles Stanley Direct and the money market fubds they have access to don't seem to have a decent return. I would be interested to know what experience other people have had with their SIPP providers.
CD's at JP Morgan Chase are currently 4% completely safe, savings is lower, but you only keep small amounts in savings as a holding place for money that will be invested in higher yielding CD's, bonds or treasuries.
my dad always said
Put your money under a big rock!
Trade Republic 2% Interactive Brokers have 4.33% on their login screen (US only probably)
R these money market funds as liquid as savings/checkings accounts at a retail bank?
Hi James, new sub here. A very interesting video. Is there a best time of the month to buy or sell a money market fund or does it not matter? I'm with vanguard. Thanks.
It does not matter. The unit price rises as income accrues so you get paid your fair share.
Smile great video - thanks for the blackout @4:23 🤭
You would think I watch my videos back in full before uploading..... The silver lining is that the blackout makes people go back and rewatch it because they're not sure what happened, so the TH-cam algorithm thinks thats a really interesting bit of the video and boosts the video overall. Win some you lose some!
Our "professional advisor" persuaded us years ago to move it to high interest MM funds. What he did not tell us was that it was invested at Mex Peso's. A week later the peso fell 50%! And our stupid tax system made us pay tax on the interest, even when we lost half the principal :((
Ever stop to thi k if so called financial advisors are qualified to advise us on were we should invest our hard earned cash. Then why are they still having to work for a living ? 🙄 🤔
I have almost all cash in T-bill ladders or in 4.3% money market accounts.... 75% in T-bills. My mix 45% brokerage accounts, 45% T-bills and 8% money market leaving 2% in checking. Fees? Never pay fees.
I just looked at the Vanguard funds in Aus. It looks very much like someone is stripping profits out every 3 months. Price keeps dropping to 0.995 rises over 3 months then dumps again.
If your assets (stocks, bonds, not affiliated with the bank etc) are held by a brokerage within a bank, and that bank were to become insolvent, are those assets still secure?
The rate of return on vanguards money Market fund is currently 2.27% as of 14Apr2023 not 3.48% like you said.
If you can lock your money up, look at CDs. Nearly the same rate, but the rate is 100% guaranteed and not subject to interest rate fluctuation. There’s the suggestion that MMF rates could be dropped quickly. I just got 4.25% on a 13 month CD.
Of course, if you want are happy to tie your money up, you can usually get higher rates.
These are alternatives for easy access cash.
As a matter of interes5 on a money market fund have you found if there is a consistently best time to withdraw , ie say two days before end of month or say two days after month beginning ?