The Only Safe Place to Keep Cash (With high interest!)
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- Опубліковано 29 кві 2024
- How to Bypass the Banks and earn high levels of interest on your cash.
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0:00 Intro
1:46 Bank Crisis
4:38 How banks make money from you
5:15 How to bypass the banks
8:36 Benefits
8:59 Drawbacks
10:21 Use Cases
What do you think, will you be using Money Market funds?
Probably - do money market funds earn considerably higher interest than high-interest/low-service online banks? If so, it seems like it would make sense to put some of my emergency fund into a money market fund. My emergency fund is currently 6 months of income, but I would only need to get one month at a time; so delay in accessing the remainder should not be a consideration. That being said, I currently have the emergency fund spread across two savings accounts at two high-interest internet banks, so they are already making a little under 4% interest (I'm in the States).
@@cisium1184 Here's the index for the overnight rate in the US: www.newyorkfed.org/markets/reference-rates/sofr
You can always hunt around and find good offers for savings accounts, some of which may be better than this rate. But they are often capped out at a maximum value. I personally don't have the time/patience to shift money around all the time so these funds work well for me.
Have been for the last 6 months.
I parked some money inside an actively managed money market fund inside of a Mercer Master Trust pension. I was considering trying to time the market (bad idea, obviously) but then decided it was better to buy units of a passive index over 15 year gilts fund. My natural inclination is to invest in equities, however trying to temper that due to being 53 years of age. Anyway, Jack Bogle's books suggest that asset allocation is a key component of an indexes mutual fund strategy. However, it does not look like a one size fits all kind of scenario...
No - not for me, for various reasons.
keep in mind that regulated banks are insured by FDIC (CDIC in Canada). Money market funds are not insured.
Banks stopped being relevant to small businesses back in the 1990s. In our town, many banks cut credit lines. Then five years later they begged those small companies to barrow. It was too late, times had changed and business plans had changed as well.
I think you're missing another reason for low bank interest rates: they don't need our money to lend to others, they can get it from the central bank instead. This is one of the two bad changes to come out of the 2008 crisis (the other being massive money printing).
Yes you’re right, it’s called quantitative easing (empty money)
It should be noted that Inter-bank lending is a contagion parameter when one bank collapses.
QE isn't even the biggest issue. Its the fact that they need 0 proof of reserve anymore thanks to Trump's removal of the reserve limits. So they don't need to prove they have the reserves available for you to withdraw, which is how money is actually printed now. The govt has very little power when printing to affect inflation anymore thanks to this.
It also means that we have 0 safety net because our jobs are at risk with banks failing due to lack of reserves.
@@puffingtonsmythe8690just print it up, but it's all just a giant ponzi scheme that USA is dependent on keeping everyone in debt or it all falls
Another fantastic video - I always learn so much from your content. Thank you.
(FYI - there’s a blank section with no video - just sound from 4:24 - 4:35 you might want to sort. )
Thanks James for a very timely video. Especially the last comment...
Your channel is really really really important for everyone alive!
This is the video I needed right now. Perfext!😊
Thank you very much for explaining Money Markets, and so well. I keep hearing them mentioned, especially in US vlogs, but this is the first time I have fully understood what they are.
This channel is so helpful. Thank you.
Thanks for this important information. We are lucky to have you.
thanks James was looking for a safer way to store cash in my ISA and SIPP and wasn’t aware of these funds
Really really helpful vid. Thx a lot. I have a house deposit sitting doing not very much while we try and find a house.
Crisp and concise presentation... I am a subscriber
my dad always said
Put your money under a big rock!
Sounds perfect for an emergency fund! Thanks, I was looking for something like this ❤ . Cheers
You're welcome.
Why not just put your money into the smaller bank with the higher interest rate?
Great video brotherman. Thanks for teaching me this. I have always been looking for ways to step out of the big banks
With how prestigious Lloyds presents itself to be, they sure do screw over the people that they call customers.
Thanks James 😊
Please can you do a video about pension recycling?
I don’t understand… in the last week one of Australia’s top banks have pulled cash completely, no deposits no withdrawal and as I believe it’s not the only one in the world ?????
Thanks for the video James! Extremely helpful 👍
Glad it was helpful!
Thank you for your time.
Thanks James!
Hey, great information thank you! Please can you put the Next Video link in the description? On my device the in-video links don't even display so I have no idea what video you're directing us to
Very helpful reminder & great coverage of the pros & cons of MM funds. Thank you,
Thank you James ... another excellent video - Very informative.
Very welcome
Great never heard of them before your video thanks 😊
Great video James, I may move part of my emergency fund into a money market fund while interest rates are high.
Thank you for your insight.
Hi James, could you do a video about protection of shares and EFTs in ISA S&S ? I tried to looked up if the £85k protection from FSCS and FCA covers shares and ETFs and it is not really clear for me if this is, in terms of company / funds going under (not investment risk itself). There seems to be some niuance about the fact if you received "advice" to invest or not. Will be great to hear it from trusted source. Love your content. Thank you.
Great Video James, Potentially another investment in my 'play portfolio'
Gold … a hedge against inflation is obviously higher return than interest offered by anyone right now 👍
Good video. I think I’d use one in my SIPP when and if I decided to convert it, or part of it, to an annuity to avoid any last minute market changes affecting the annuity income.
Hi David, I can't say if that is suitable for you specifically but that is often a valid use case.
Thanks James. I always wanted to know about Money Markets.👍
Our "professional advisor" persuaded us years ago to move it to high interest MM funds. What he did not tell us was that it was invested at Mex Peso's. A week later the peso fell 50%! And our stupid tax system made us pay tax on the interest, even when we lost half the principal :((
Any good way to earn more than 3-4% on idle cash with virtually no risk right now? Willing to lock up for up to a year or so if needed. What are good options? I have about $173k retirement funds that i want to grow.
Is this a real question? Buy T-Bills?
Anyone have recommendations for a reliable monthly investment? I hope to ultimately supplement my income from work with a monthly income from investments. I will still make long-term investments, but it would be wonderful to have a little additional money each month.
@@kashkat987 My investment advisor, "JILL MARIE CARROLL," a US-registered CFP who you may have heard of or seen on the CNBC news, uses trade signals to help me diversify my money well, and I must admit that it has been a big comfort. Highly diversified portfolio, incredible profits, and minimal to no engagement on my part. Having grown by 20% on a monthly basis, my portfolio generated a $450k return in 2022.
@@Ammo-Hoarder Do you mean to mimic her trades as they are made in Etoro when you say you would use trade signals from her? I hope I'm not required to give over my money. I just looked her up, located her website, and read through her qualifications and resume, all of which seem excellent. Does she have a minimum to work with?
I can't give anyone my money, so I'll caution you against doing so. My account only mirrors her trades, and I have no idea if she has a minimum, but you may get in touch with her through her website and find out.
Great content James, as usual!😊
Glad you enjoyed it!
I get 4.7 % from a fixed term in the bank paid monthly interest, quite happy with this and another account I get 5.5% but thanks for covering MMF's never knew about this before.
Great information, well done!
Another fantastic educational video. Thanks 👏
You're welcome!
Great video, learnt something new for sure today. I am saving for a mortgage so this is very relevant, thanks!
Glad it was helpful!
Agree James I would just say that the funds will yield 4.3%, if you deposit in an ISA for example aj bell will take in total cost 0.52% annually) you’re slightly better off than an easy access at 3.4%
Hi Phil yes, it will depend on which broker you use. Some charge fixed fees other %'s that top out at a certain level.
Good stuff! thanks
If you think that banks take depositors money and then lend it out, you’re still working with primary school thinking... that’s clearly not how it works with fractional reserve banking.
Thanks for this James. I always wondered why someone who invest in a money market fund
Very useful. I tend to mix easy access with fixed term accounts. Had never considered MMFs before, I guess partly because rates have been so low for so long. Thanks for enlightening me! This takes the effort out of chasing the best (altho I take your point about it being less useful in a falling interest rate environment...)
Money Market Funds are Not secure unlike a Money Market Account is insured by the F.D.I.C. !! You can lose your money in Money Market Funds !! This is something you really need to study on before doing anything !!!
@@zakman9244 doesn't bother me. Particularly the US-centric FDIC insurance
So useful for me, James. I’m on the verge of buying my first house and have a load of cash that I’ve freed up in my LISA. This will be a good place to park the cash in the short term
MM funds can be useful if you’ve got your cash inside a tax wrapper like this and therefore can’t get access to normal savings account rates.
I haven't used banks for years. I use only Credit Unions. Anything that uses stock market in any way, it could drop like a rock and you lose it all or most of your money.
Investing in the stock market is for the medium to long term. Everyone has a different attitude to risk. The stock market will have ups and downs, but you need to ride out the downs - you lose money if you cash in on a down, you make money if you cash in on an up.
But income earned from MMFs wouldn’t be treated as savings income so you might be taxed on it depending on the person. Still a great choice given the differential in rates but something to be aware of all the same.
Very interesting. Thank you.
Interesting video for sure. There are a ton of easy access savings accounts in the UK offered by named providers over 4%. Unless the interest difference is huge im not sure if this approach is qorth the hassle at the moment. Still, its something i wasnt aware of so appreciate you taking the time to educate us.
Nice once again.cheers
Hi James - long time watcher, first time commenter! Contrary to your point about the large banks, JP Morgan Chase (UK) actually have a really good savings interest rate at the moment with 3.1%.
Hi Cam
Thanks for the comment!
That is true, although in the UK Chase is more of a challenger bank that has to offer high rates to attract new deposits. It's established in the US but not in the UK.
Hey James, great video. Whats a good money market fund in EUR?
Thanks James. Really good video. I've been hearing about these Money Market Funds, but wasn't aware that they were available in the UK!!
No problem!
Nice video. And OMG - a new room! 😁
Good video. I’ve subscribed. Good idea to invest in MMFs within an ISA? Or would platform fees and/or other charges negate any tax benefits. I hear what you say about these being generally of a short term nature…
Good info, food for thought.
Great work James - I think I'm pretty savvy when it comes to my money but I haven't heard of this before! Worth noting that if you're a higher rate tax payer, unless these funds are held in a tax wrapper (like an ISA) then Mr Tax Man will get a decent chunk of those rates! This is therefor ideal timing as the ISA allowance for 23/24 has just reset! whoop whoop!
The tax man will always have his fill. But yes you can buy these funds in an ISA too.
Just in case you weren't aware it hasn't reset yet, it resets on the 6th of April. I don't want you accidentally over filling your annual ISA allowance and having to pay tax down the line.
@@MrLaughinggrass good point - I nearly missed that!
My understanding (UK).... if you were to own 'shares' in an Accumulating Money Market Fund then the tax you pay is CGT upon disposal. If you were to own in an Income MMF fund then you pay tax on the monthly income each tax year and the income is treated as Interest income. This feature gives you some more options, if you are investing outside a SIPP / Isa. Choose your share class accordingly!
ISAs are pointless. There's other things like luxury watches that will give you a better return and even outperform property.
Hi James, as always great content.
My Mrs and I have been trying to get in touch with your business to get financial planning/advice but haven't been able to do so.
We completed the questionnaire, as well as filled the form. Is there an easier or more direct way to book the appointment?
Please let me know, thank you.
Hello! My diary is often back up, but you should be able to book some time to speak with my team through our website: octopuswealth.com/
THANK YOU
Hi James, is there a Sterling fund that is government backed only? Ultra short term government bonds only
When there are high yield savings accounts that give 4.29% APY and the deposit is insured by FDIC why would i bother for the added hassle its not worth it.
And also Gold bars Silver. Platinum and Palladium precious metals people are switching to. Profit wont been seen for approx 5 years but Gold has risen in value regardless of what currency is doing and banks are buying large amounts too
Thank you. Do money market funds compound interesrt? if so how often typically?
Great stuff, just the video I needed. You been Skiing James? You look like you've caught the sun!
I have, Ischgl in Austria! It took me a week to recover...
@@JamesShack nice.
Great video! Going to park the emergency fund in one of these. Cheers 👍🏻
You’re welcome!
You should do a video for what you put your cash in when rates are getting cut and overall low.
It's tempting, but just last week the FT was writing about the US Treasury warning about structural vulnerabilities in money market funds. I think I'll stick with FCA covered cash savings instead of possibly losing a painstakingly saved house deposit.
This is prudent and sensible.
Many of these alternative off market schemes are scams.
This is very timely as I've just been researching mm fund. Would it be a good idea to put pension contributions into a money market fund as you get close to retirement in order to benefit from the tax advantage but minimise the risk of markets being down at the point you retire and want to draw some cash from the pension? Thanks.
That is a potential use case, yes. Although I can't say whether it would be suitable for you personally.
Many years ago, in Australia, I was called a fool for putting my savings in one of the big banks, instead of investing with other financial institutions to get double or more interest. Then we had the financial crash. I still had my money, and the so-called advisers lost theirs. Better to be safe than sorry.
In the UK savings up to £85k are protected
Woody Allen said, " a financial advisor invests your money till it's all gone".
Hi James, if i'm looking for a MMF or ETF in GBP, which invests in gilts / treasuries, what the best way to draw up a short list? Thanks
I used to tell lawyer jokes, I now tell banker truths.
Was
Lyxor Smart Overnight Return - UCITS ETF C-GBP (the "Fund")
the fund you mentioned in your second example ?
CD's at JP Morgan Chase are currently 4% completely safe, savings is lower, but you only keep small amounts in savings as a holding place for money that will be invested in higher yielding CD's, bonds or treasuries.
Good work. I use premium bonds as my emergency fund currently
Bad idea!
I did that for a while between houses as I didn't want to lock my cash, worked it out afterwards the small wins meant I got the average return with a small chance I could have (but did not) score a big win.
Premium bonds are a very clever way to get people to save more (because they know we all love a lottery). Still, the problem is that - just like all lotteries - they are not as good as you think, and people hold onto Premium Bonds when they should instead be investing for the long term.
The average yield at the moment is 3.3%, but that is the "mean" which is heavily skewed by the £1m winners.
The average (median) yield is either 0% if you have a small amount or just 2.55% if you have the full £50,000. See here: www.moneysavingexpert.com/savings/premium-bonds
Yes, that yield is tax-free, but most people do not max out their ISA allowances any way, which would be a more reliable alternative.
Don't get me wrong, I think they are a clever way to get people to save more, and they can be useful to park your emergency fund or money you need in the short term. However, people often hold far too much in them when they should really be investing for the long term.
The reason its performance is so smooth and its fees so cheap is because that Lxyor fund is a synthetic fund, which means it's actually an equity fund with a swap against the bank Societe General.
There is an underlying basket of equities in the fund which is used as collateral. It's something to be a little cautious about compared to the Vanguard fund since it doesn't actually hold any of the assets you highlighted earlier.
No such thing as a free lunch
Hi Matthew, this is facilitated by a Swap agreement which brings in more concentrated counterparty risk, but what makes you define this as an Equity fund?
To be clear - for other viewers - the risk attached to this fund is comparable with other Money Market funds, not an equities fund.
Ooops caveat emptor
@@JamesShack Wrote a longer reply which seemed to disappear, but if you look at the fund factsheet it's literally holding nothing but equities whose performance is "swapped" for the SONIA index via Soc Gen. So long as Soc Gen is solvent it's all fine, which makes the risk very small.
I raise it just because one of the points you make in the video is that it distributes the money around multiple banks which isn't the case here.
@@matthewshipton9069 Thank you for the comment and well raised.
That was enlightening for those who don't know indeed , on the other hand i've never been so open to the concept of interest on cash i personally prefer direct capital profit on cash therefore i've never cared about how much interest i'll be getting from a bank as much as i care about keeping the cash safe and secured and that's the ultimate use of a bank to me personally but thank you for sharing
Not sure if its because this video is 5 months ago, but if you are based in the UK, there are a lot of easy access savings accounts now that have the same or slightly more interest than most MMF. And it will be protected by the FSCS too
I have a 5 yr fixed isa over 5% interest.
Please could you say what amounts you need for these funds, and where to find them? Thankyou
How much money do you need to save for emergency savings? 3 months or 6 months in cash?
Hi James. Great content as ever. A quick query, I am assuming that any gain would be treated as gross interest rather than CGT. Would this interest have to be declared on a personal tax return regarding the amount accrued in any given tax year or on withdrawal of the money market product?
In the year the income is accrued, even if you keep holding the fund.
Trade Republic 2% Interactive Brokers have 4.33% on their login screen (US only probably)
A really helpful video. I am going to be taking a DB pension later this year, but need an extra £10k cash per year to supplement this. I have been wondering where to hold this for the first year, years 2 and 3 I thought I could lock up in a bond. This could then trickle down into the MMF each year (so long as interest rates stay up). Would that seem a good idea?
Hi Rob, I can't say if that is suitable for you specifically, but people often do use Money Market funds for this purpose.
I have almost all cash in T-bill ladders or in 4.3% money market accounts.... 75% in T-bills. My mix 45% brokerage accounts, 45% T-bills and 8% money market leaving 2% in checking. Fees? Never pay fees.
Some of the bank savings accounts are not that bad. Club Lloyds Monthly Saver offers 6.25%, Monthly Saver 5.25%. Santander Edge Saver 7%. Santander Regular Saver 5%. Edge Up Saver 3.5% on 25k. Nationwide is offering 8% on a limited amount of savings. Leeds, Aldermore, Skipton, Marcus, Cynergy Bank etc all offer 4-4.7%. All of these are easy access accounts.
If you can lock your money up, look at CDs. Nearly the same rate, but the rate is 100% guaranteed and not subject to interest rate fluctuation. There’s the suggestion that MMF rates could be dropped quickly. I just got 4.25% on a 13 month CD.
Of course, if you want are happy to tie your money up, you can usually get higher rates.
These are alternatives for easy access cash.
Does this apply to the American financial system?
Thanks, very interesting. The current interest rates offered by most high street banks are a joke compared to what other offers are out there.
With MMF - when interest pays it gains and next day it went back to minus than investment amount. Does it mean investor has to sell every time interest pay and buy again after ?
However caution urged - Not all MM funds are actually based on MM instruments - There is a Lxyor fund - Smart Overnight Return - which is equity based - so if the equity market tanks, so will the capital in the fund (I see no mention of protection in the details...)
Hi James. Really enjoy your videos. I notice in a reply to a US contributor, you made reference to SOFR (the US equivalent to SONIA). Are you aware of any MMFs available to UK investors that attempt to track the SOFR. I've failed to find any ...
I'm not, but I haven't looked. You might be able to find a US fund that is hedged back to GBP.
Cardano 4,17% self custody I trust more than anything rewards five days
Very interesting video. Slightly inaccurate when it comes to interest rates on offer by the larger banks who are now offering much more than 1%, but point taken
I get 4% on a non money market account that is FDIC insured to >250k as the money is spread among different banks. It’s not as accessible as my low interest savings account 83 biz days vs immediately or NBD with an on demand savings) so I have. Few thousand in my immediate savings account and in intend to move more into my intermediate account
Considering using these in my LISA on Hargreaves. But, feels like a stupid question. Where do I see what dividend/interest the fund is paying? Can't find anything. Any other HL users know?
Hi James, Thanks for the video.
I hold cash in my ISA account (Vanguard) getting about 2% interest per month (after fees). the reason I do this is that I want to dollar cost average rather than putting the pump sum into my investments in one go - the cash fund is therefore shrinking as I push it into funds.
Rather that holding it as cash, a money market fund will currently provide me with a better short term return and I might therefore swap this going forward.
The question I have re other cash savings I have is this - If I were to hold cash in a money market fund rather than in a fixed deposit , for instance, and outside of my ISA (allowance filled for the year), what would any gains from the MMF be classed as for the purpose of tax - Interest, capital gains or dividends?
Thanks once again for the video. Tim
It depends on what the funds holds. But generally it’s interest/bond coupons and taxed as income.
@@JamesShack thanks James
"I hold cash in my ISA account (Vanguard) getting about 2% interest per month (after fees)" Per MONTH or per YEAR?
@@declanmcardle Got my attention as well.
@@JamesShack James, can you ask the OP to confirm per month or per year please?
Thanks
High James. Great content. I have some cash in my Hargreaves Lansdown SIPP. Is there a MMF that HL offer. I am happy to park for 6 months to 12 months but looking for low risk. many thanks
Hi Philip, yes there are quite a few. If you go into the fund search and filter by sector you can select Money Market Fund. However, many funds are ETFs, like the Lyxor fund in this video so won’t appear in that filter. You need to search for them in the shares/ETF search.
Sorry for the very basic question but where can I buy those Mmf? Are they in Degiro? (I'm based in Ireland so looking for euro MMF)