If you are like many in the country, you are nervous about what the stock market is going to do next. Yes, it dropped an unprecedented amount earlier this spring but has since made a welcome comeback. But with the uncertainty of what is yet to come with COVID-19 and what it may still do to our economy, it leaves many with a well-deserved uneasy feeling. And that especially can be attributed to those at or nearing retirement and cannot afford to lose any of their hard-earned capital. So, that leaves people looking at where to place their cash if they are not invested in the stock market. Well, here are some of the best places that I know of and have found to park your cash for the short-term or for under five years.
US Treasury Backed Debt
Yes, US debt is indeed paying historic low-interest rates, but there is no safer place to park your available cash, other than an FDIC guaranteed account. But that does not mean that people are not flocking to the safety that US debt provides, and it could not be easier to buy a variety of US debt obligations. In this post, we will examine two types of debt being the Treasury Bills and the I class savings bond. But know that the Treasury does offer and sell a much broader range of US debt ranging from one-month Treasury Bills to 30-year Treasury Bonds. They also offer two varieties of Savings Bonds. And finally, they offer special bonds that are adjusted for inflation that are known as TIPS. Each of these is unique in its own way.
Treasury Bills are sold at a discount to the face value, which will represent the interest payment on the note. If you buy them directly from the US Treasury, they can be purchased for as little as $100 and on $100 increments after that. But as I stated earlier, they are sold at a discount from the face value of $100, meaning at the last public auction of selling a four-week bond, it would have cost only $99.991833. As you can see, you will not get rich from buying Treasury Bills, but they are easily bought and can be done so in small increments.
I-Bonds, on the other hand, when purchased through the US Treasury website, can be purchased in $25 increments and have a dual interest component that resets semi-annually. We will look at the interest rate being paid right now on bonds for the May 1 to October 31 period. The first part of the interest paid is a fixed rate that does not change as the bond ages, and right now, that interest rate is 0.00%. But the beauty of an I-Bond is the inflation adjustment that is the part that is reset on a semi-annual basis. Right now, the I-Bond pays 0.53% for the current period. This means that the annual interest rate on an I-Bond is 1.06%. Interest on these bonds is paid semi-annually when the inflation portion of the bond resets, and if you hold the bond for at least five years, there is no three-month interest penalty for cashing in the bond.
To buy these or any US Treasury debts, go to and open an account at the Treasury’s website portal, https://www.treasurydirect.gov/.
Conventional Financial Institutions
If you are looking for a more conventional place to park your cash and earn some of the best interest rates available to small investors, I recommend an online bank owned by Goldman Sachs called Marcus. To place money in Marcus, all you need to do is visit their website, open an account, and link your existing checking or savings account to their platform. They offer a high-yield savings account and a common one, three- and five-year certificates of deposits at fairly competitive rates.
As of July 18, 2020, the Marcus savings accounts are paying a 1.05% annual interest rate that is paid to the account monthly. There are no minimums to open an account and no fees to transfer funds to and from your existing account. The CD’s do not pay much more while tying up your funds for a fixed period with one- and three-year CDs paying 1.10% and the five-year paying 1.15%. I recommend leaving your funds in the savings account and waiting until the CD interest rates rise some as the difference is not worth committing your funds much a year.
To open an account with Marcus, visit https://www.marcus.com/us/en.
Worthy Bonds
The last option is the newest and least known to people in general, and that is Worthy Bonds. Worthy sells bonds for as little as $10, and interests in small and medium-sized businesses secure them. These small bonds do pay an impressive 5%, which is compounded daily, thereby allowing your funds to grow even faster than other more conventional investments. While these bonds are not 100% guaranteed, they are back by some form of business assets meaning that they are secured debt, making them relatively safe investments. All you need to do is link an existing account to the Worthy platform and buy single bonds, or you may set up a bond-buying schedule from daily to weekly and monthly. There are no fees associated with the buying or purchasing of these bonds and no early redemption penalties.
To open an account with Worthy, I will give you two options. The first is a referral link that, when the conditions are met, will earn each person who opens and funds an account a $10 bond. To use the referral link, go to https://worthybonds.com/?r=Fldji. If you prefer not to use the referral link, go to https://worthy.capital/start and get started today.
Cash is not what I recommend unless you are at or nearing retirement. Still, for those that are uneasy with the current situation and all the unknowns, I can completely understand a desire to be in a heavy cash position. I hope that I have provided a few good options as to where to park your excess cash in these troubled times.
Suppose you need assistance or have questions reach out to me or any fee-only Registered Financial Consultant. And to join my email newsletter, fill out the form below.
