Cash is Trash, No Longer! 8/23/23

Hello NFC Clients and Friends,

For decades the “cash is trash” mantra in finance has been defensible for a variety of reasons. In 2023, however, the countervailing finance adage, “cash is king,” is certainly having its day in the sun. NFC clients understand the importance of building and maintaining an Emergency Fund (EF) of readily available cash and cash equivalents. Sadly, this is not the case for the majority (57%!) of Americans who could not come up with $1000 for an emergency. Our EF's allow us to sleep well at night knowing that our insurance deductibles and potential visits from Uncle Murphy (of Murphy’s Law), while inconvenient and painful (hopefully not literally!), are accounted for, financially speaking at least.

Thanks to our rising rate environment, these cash reserves can now actually earn us a real rate of return! In order to take advantage of this opportunity, however, we have to pay attention, and act. Unfortunately, the rates on our checking, savings, and money market accounts at the credit union or “giant monster mega banks,” as Clark Howard calls them, will not rise commensurately with the Fed rate hikes. Click the link and watch at least the first 20 seconds of the video above--- it's hilarious! So, how can we take advantage, and make our savings earn as much as the risk free market will allow? NFC clients have chosen to use a FDIC insured, high yield savings account like Ally, which raised its rates 6x’s in 2023 to 4.25% APY, crushing the SECU’s Money Market rate of 1.0%, and checking account at 0.05% (as of 8/1/23). Even more exciting, Vanguard’s settlement fund is the SIPC insured Vanguard Federal Money Market Fund (VMFXX) which also continues to rise with prevailing rates, presently offers a 7 day SEC yield of 5.24% (as of 8/2/23)!

You work hard for your money, so make it work hard for you! It can make a significant difference. See for yourself the impact in just one year of the hypothetical case below. Interested (pun intended) in finding other institutions with high(er) rates, consider checking out Bankrate for up to date research. Feel free to post your questions and celebrate your wins/progress in the Discussion Forum, and I will try to do better keeping up. Be well!

	SECU Checking Acct.	SECU Money Market	Ally HYSA	Vanguard (VMFXX)
Savings/EF	$10,000	$10,000	$10,000	$10,000
Interest Rate	0.05%	1.0%	4.25%	5.24%-0.11% (fee)
Annual Interest Earned	$5	$100	$425	$513

Yours in Financial Fitness,

David

Norman Financial Coaching