A buddy of mine told me about Wealthfront recently and they’re 5% money market account rates.
Growing up in a world where savings accounts and even CDs never approached more than 2%, the rates on this new thing blew me away.
Free money is great, and I’d love to take advantage of these rates, but the only cash I have currently is the emergency fund I’m trying to build.
Anyone have thoughts on if putting an efund in this kind of service is a bad idea? Not sure if it’ll be liquid enough if a major expense comes up.
I have my savings in a high yield savings account (FDIC insured) and a checking account at the same bank, so I can access the money pretty much instantly if needed. I don’t use Wealthfront specifically but I’ve heard good things about them. Once you earn more than $10 in interest you do have to pay taxes on it.
Sure, why not? Here’s how my emergency fund is set up:
- 1 months expenses next to my checking
- ~50% of the rest in Ibonds
- ~50% of the rest in t-bills
With ibond rates going down, I’m laddering into t-bills, with the ultimate goal being some bonds maturing every 2 weeks.
I currently also use my brokerage account as my bank account, which is invested in SPAXX (4.91% 7-day average APY). It provides an awesome debit card (no foreign transaction fees, ATM fee reimbursement worldwide, etc), earlier access to my money vs other accounts (e.g. I get paid on Friday, money is there on Thursday), and I’ve had no issues with it for the year or so I’ve used it this way. My t-bills live next to my savings “slush” in the same account, so it’s quite nice. Here’s my actual setup:
- Fidelity Bloom Save - receives paycheck and transfers automatically bimonthly to “checking”; also has my t-bills
- Fidelity Bloom Spend - main “checking” amount, has a debit card, which I never use and keep deactivated
- Fidelity CMA - $0 balance; has my “real” debit card (the awesome one with no FTF), and I just make a transfer from Bloom Spend to this as needed
- Ally Checking and Savings - old main account; connected to Target debit for that sweet 5% discount, and used for a couple of transfers I haven’t bothered moving to Fidelity; I get 4% APY on my savings there, but I only keep about a few hundred there so it’s not an interesting amount
- Treasury Direct - rest of my efund in Ibonds; I’m considering moving this to t-bills at Fidelity, but I’m still deciding
This is a great breakdown! Thanks for taking the time to share. You’ve given me a lot to think about and I’m glad this can work.