Hacker News Reader

Comment by dustincoates | Hacker News Reader

But why would you put $100k in savings? There are so many better places that are going to get you more than a monthly grocery bill over time.

View on HN

If you're looking to use that 100k soon, maybe for a new house, or saving to start a business, then you want very safe and liquid options. 4% is close enough to other safe options that if it's easy then that's good enough for some people.

Treasury bills are a great option. A 3 month treasury pays over 5% and they are exempt from state income tax. There is not meaningful interest rate risk in a bond that matures in a few months, but you can still sell before maturity if you need the money. So in almost any scenario you can come up with, it’s better than the savings account.

The average person has no idea what a treasury bond is. Everyone knows what a savings account is.

Sure, they sound scary and complicated, but I’m here to tell you that if you have a need to store a six-figure sum of money in a cash equivalent, it’s worth figuring out how to buy a treasury bill from your brokerage to get the most out of your money.

Money market is completely liquid.

> But why would you put $100k in savings? There are so many better places that are going to get you more than a monthly grocery bill over time.

If someone is sitting on 100k in savings, there isn't much of a practical difference to moving it to a money market. The rates aren't significantly different. Some banks have higher savings rates, some higher money market rates. That makes other things your deciding factors such as the trust in a brand, quality of life, ease of use.

Savings accounts are tax-disadvantaged; interest is taxed like ordinary income. I'm not sure about money market funds, but municipal/treasury bonds don't have that problem.

Remember, taxes are designed to benefit rich passive investors, so you gotta act like one.

Money market interest income is taxed as income. So replying to the commenter to use money market accounts over savings, there isn’t a big difference. People go with what’s easiest and convenient when rates aren’t significantly different.

Income from treasury bonds is taxed by the federal government.

Pretty good deal in a high tax state. I think it should be taxed as capital gains though, it's all pretty arbitrary.

And not lose money unpredictably? Do tell. (I realize 4% is less than inflation)

Money market

Looks like vanguard (vmfxx) is offering 4.78 and apple is offering 4.15. That's about 60 bps, it's not world changing, but vmfxx is a better deal but it may be a little more cumbersome for some.

Are the rates much higher? Didn't seem so at the online banks.

First think I looked at was vio, more than 50 bps higher.

Any docs or how-tos youd recommend?

Emergency savings should NEVER be put anywhere where it would be at risk or inaccessible when you need it most.

Sure, but $100k is very high for emergency savings. Most recommendations point to 3 months. Even if you are very risk adverse, most people do not need $100k for 6 or even 12 months of expenses.

The stock market has been declining for a while.

4% is better than a 10 - 50% loss.

Reply on news.ycombinator.com