All Posts

Git Yer High Yield Savins’ Account!

What To Do With Extra Cash In the 2024 Market
Do more with what you’ve earned.

Financial advisors for successful professionals, executives, and business owners.

In every finance class offered around the country, there is a fairly simple concept that goes something like this:

As interest rates drop, bonds become less attractive, incentivizing investors to purchase stocks as their returns look more attractive. However, as interest rates rise, the opposite happens – bonds will become more attractive, incentivizing investors to sell stocks for bonds.

Lately, I’ve been wondering if we are nearing this economic inflection point. Interest rates have been high for a few years now, and after the recent rally we’ve had in stocks, it wouldn’t shock me if stock returns are going to be muted for a while. Keep in mind that because inflation is sticky, the Fed is hesitant to drop rates anytime soon. Not good for stock bulls. 

It’s not just me that worries about this. A lot of people have the same concern, which causes the contrarian in me to think, “If everyone else thinks stocks are ripe for a correction, we’re probably fine and the market is likely to rip.” That’s usually how it goes. 

Peak High-Yield Savings

One major upside to the rise in interest rates is bank products. If you enjoy shopping banks for the highest possible yield, then this has been your year. Everywhere I look, I see bank advertisements for high-yield savings accounts, 12-mo CDs, and even cash rewards if you set up direct deposit with them. 

The ‘most interesting’ option I’ve come across? Check out Redneck Bank (not joking – this is a real bank “where bankin’s funner”).

Redneck Bank - What To Do With Extra Cash In the 2024 Market

Just to be clear, I’m not recommending that you open an account at Redneck Bank. Yes, their rates are among the highest I’ve seen, but you have to do your own due diligence. Besides, we have our own solution for our clients that have short-term cash balances (more on that below). Though, you gotta hand it Redneck Bank – what a brand! They know exactly who they are and they know their ideal client!

Risk-free (or near risk-free) options like these high yield savings accounts are a real alternative to riskier assets like stocks. Of course, we can have a deep discussion detailing the reasons why you shouldn’t abandon your long-term portfolio for something as trivial as the potential of a market correction. Right or wrong, it is a real reason why some people sell stocks. 4%- 5% in a risk-free asset is something to not ignore. 

Idle Cash

If you have cash sitting on the sideline, you should be earning something in this environment. Gone are the days when the most competitive high-yield savings account gave you a 0.50% APY. You should be getting more.

Ally Bank - Online Savings Account Rate Ally Savings Rate vs Fed Funds Effective Rate - What To Do With Extra Cash In the 2024 Market

If your bank doesn’t offer a high-yield savings account higher than 4%, seriously consider banking elsewhere. 

We offer our clients a 5.1% APY high-yield savings account through our custodian. It is among the most competitive yields on the market and it allows our clients to keep everything all at one place. This account offers up to $1 million dollars in FDIC insurance for individual cash accounts and up to $2 million for joint cash accounts. 

Note that we don’t charge a management fee on these assets. It’s part of our service offering. 

Like the fact that we include tax planning for no extra fee.

Like the fact that we include estate planning for no extra fee (yes, all docs are included in this).

Like the fact that we include an in-depth financial plan with ongoing reviews for no extra fee. 

We believe that if we take care of our clients, they will take care us. Simply put. (Okay, I’ll stop promoting our business, but if you’re interested in a breakdown of our services, check this out).

Financial planning that matches your ambition.

Financial advisors for successful professionals, executives, and business owners.

Here To Stay?

After nearly two decades of really low-interest rates, it’s nice to see bank accounts offer a respectable yield. Of course, the inverse of this is the higher cost of debt. No one likes to take out a 7% mortgage in a housing market that refuses to decline. But that is a topic for another day. 

The question is whether or not these rates are here to stay for a while. If inflation is as sticky as the Fed seems to think it is, then yes, these rates will stay elevated. 

However, if consumer demand finally wanes, we will see inflation come down (the Fed has a 2% target rate). In this scenario, the Fed is likely to cut rates as they fear a recession (or worse, deflation). If the Fed cuts rates, this will drop mortgages rates, CDs, and savings rates. For our friends that like to shop bank yields, this is not good news.

So, the bottom line is that all of this depends on what inflation does. And forecasting inflation is something that not even the Federal Reserve can do accurately. Remember when the Fed said that inflation was transitory? Me neither. So it is best to wait and see what happens with the inflation rate. 

But until then, make the best of these higher-yielding rates! 

Schedule Meeting


Free Subscription

Learn how you can capitalize on the economy’s changing tides with a pragmatic approach to planning and investing. Get a free bi-weekly email with expert insights from Bull Oak’s wealth management team.