What are you earning on your cash?

You should no longer be satisfied with earning next to nothing on your cash sitting at the bank.

After years of very low short term interest rates, you can now earn meaningful interest on cash and short term money.

Unfortunately, the interest rate at your bank may not have increased and may not increase much in the near future.

Thus, this is a simple but important item you should review and possibly take some action on. It could be worth a decent amount of money.

The 90 day US Treasury bill is currently yielding around 1.75%.

If you have excess cash that you do not immediately need and you are not earning at least 1% on your funds at the bank, you should be contacting us to discuss this.

For example, if you have $100,000 in your bank earning a .01-.05% (which is likely your bank’s current interest rate), you could earn $1,750 annually, based on current interest rates, less our investment management fees, rather than a few dollars.

If you have significant funds in the bank, the money could be invested in short term fixed income investments and the interest rate could be higher than stated above if you may not need the money in the next 90 days.

A few factors to consider:

  • The Federal Reserve is likely to increase short term interest rates by .25% at least twice more this year, with additional increases most likely in 2019.
    • Thus, it is reasonable that the 90 day Treasury bill and other very short term investments will be yielding 2-2.50% by late 2018 or during 2019.
  • If you do not need the money in the immediate future, your cash could be invested in various short term conservative investments, such as Treasury instruments, CDs or corporate bonds.
  • As always, we act in a fiduciary manner.  This means that we would only recommend you take these steps if it will be financially beneficial to you and make sense for your overall situation.
  • For the short term investments we recommend, they can generally be easily liquidated within a few days.  So there is no reason not to take advantage of these better interest rates if your bank is not offering interest rates on your excess cash funds of greater than 1%.

Monitoring your short term interest income is not something that most people have focused on in recent years.

Now is the time to review and take action.

Don’t be content with earning pennies on your cash.

Give us a call or send us an e-mail and let’s talk about this!

 

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