I’m not going to tell you where to put your money, because this isn’t financial advice (lol) and I want you to think for yourself. However, I hope your money isn’t sitting in cash doing nothing. Even if it is, please put it into a high-interest rate savings account.
I am going to tell you where I’m putting mine.
Spoiler: I do weird stuff with it most of you won’t be comfortable with.
I’m not trying to hold high amount of cash, because that’s how you lose to inflation. However, I do still hold some cash for liquidity, as I decide what my next investment is, and for my 3-month emergency fund (which is a fundamental). This post is about where I keep that cash.
Now, in order from least to greatest:
Traditional Banks: 0.01% APY
You get horrific rates at banks. You probably already know that which is why you clicked on this blog.
Seriously. If you have $1,000 in a traditional bank’s savings account, and you don’t touch it for a year, you’ll end up with $1,010. Barely enough for lunch. Don’t leave your money in a traditional bank account—aside from whatever you need to pay bills that month.
The main reason I still have a bank account is because I treat it as the hub between all my other accounts. E.g. I get paid through it, send cash to investment accounts, rebalance my investment account and send cash back to my bank, then on to a crypto account, etc. It’s a tool for liquidity—not for savings.
When the Fed’s interest rates are above 0, some banks would raise the savings rate to 0.25%. Right now, the Fed has rates near zero, and my US Bank account’s rate is 0.01%.
Wealthfront: 0.35% APY
Wealthfront is the OG high-interest savings account. When the Fed’s interest rates were higher, Wealthfront’s savings rate was closer to 2%. This doesn’t beat inflation, but it’s around an order of magnitude above your traditional banks.
Sadly, the Fed recently announced interest rates will remain near zero until 2023, so Wealthfront’s savings rate will remain low for a while as well. This is where I used to keep my 3-month emergency savings. I still keep my IRA in there because their robo-advisor is supposed to be good. Then again, I don’t care about retirement account activity since I’m trying to grow my normal investment accounts and grow my working capital. I don’t worry about my IRA contributions. Whoops. I just rollover my 401k/403b accounts into it when I leave a job.
If you want to sign up, go for it. It’s all online—they just send you some mail in the beginning for legal reasons. FYI, that link is specific to me so we both get money managed for free if you sign up with it.
Robinhood: 0.35% APY
Gross. I’ve moved most of my money out of Robinhood after the GameStop incident where they removed the “buy” button. Sad, because I got a neat little debit card with an American flag on it (because I’m godblessed patriot). Oh well.
If you wanna keep your money here, they have their own high-interest savings account through a partner bank. You can withdraw the cash from ATMs and use it to invest on the Robinhood app. It’s also FDIC insured, since it’s partnered with an actual bank. Here’s a link to open an account where we both get free stock. Buyer beware.
If you want to be a savage, use the link, get your free stock, and then sell it and cash out your account. Free $5.
BlockFi: 8.6% APY
Yes, really. 8.6%.
BlockFi is a company that lets you borrow cash against your crypto—that way you don’t have to sell your crypto if you need short-term cash. If you’re not borrowing, you can also just keep your crypto there and they will lend it out to others and you earn interest on it.
What’s the catch?
1. It’s not FDIC-insured because it’s not a bank, nor SIPC-insured because it’s not a brokerage firm investing in traditional securities like stock. So there’s a risk that if everything went bankrupt, you could lose it. I find the chances of this very unlikely, which is why I have my cash reserves there. But I would be remiss to mention this big one.
2. You’re not holding your money here in cash. It’s converted to a “stablecoin” cryptocurrency pegged to the US dollar. One of these stablecoins is always worth a dollar. The issuer of these stablecoins is audited regularly to ensure their dollar reserves match how many of their coins they have in circulation, and they’re subject to New York financial laws. You can transfer your cash back out to your bank any time.
I tend to hold my Dave Ramsey-esque three months of emergency cash in BlockFi. I also have had some Bitcoin savings in there because it, too, earns interest (6% APY). But there’s a saying in the Bitcoin world: “not your keys, not your coins.” AKA if you’re not holding your Bitcoin in your own personal wallet, someone else can steal them from you. I don’t think BlockFi would, but hey, assess the risk yourself. Part of that risk assessment is understanding why they would give you such a high interest rate for just letting them hold your cash.
If you want to sign up, use my link. I get some kind of reward if enough folks sign up through my link. I have no idea what that reward is, but I would be promoting it anyway because I love this service, so sign up with it.
I have cash split between my US Bank account (meh), Robinhood (for day trading for fun, my real investments are in Fidelity but their UI sucks), my business bank account with another bank, and BlockFi. I don’t keep liquid cash in Wealthfront, just retirement savings. And BlockFi isn’t actually cash, though I treat it like it is.
Remember, this blog is about aggressive moves towards building wealth. That’s why I save with BlockFi. If you have a better idea, I’d love to hear it! Not facetious—please comment below what you do with your short-term and emergency cash savings. I want to find the person here who is writing OTM puts with their “day-to-day” cash to earn 5% on it every week. Comment below.
Updated May 25, 2021: changes to the BlockFi section