Where to Put Your Cash?

Many people don't know how to appropriately manage their finances, an example - they put all their cash in a savings account.

Is it safe?  Yes.  But to increase your income potential, you have to confront certain risks.  

Where to put your cash depends on what's the use of the cash.  Below we will use four hypothetical examples to illustrate where to put your cash.

Example 1. Everyday Expenses

• Daily liquidity need: High
• Tolerance for losses: Low
• Vehicles to consider: Money markets, checking and savings accounts

Example 2. Emergency Funds

• Daily liquidity need: High for a portion of the fund, lower for the rest
• Tolerance for losses: Low
• Vehicles to consider: A mix of highly liquid accounts, such as money market funds, and less-liquid options, such as CDs or conservative bond funds

Example 3. Near Term Savings Target

• Daily liquidity need: Low
• Tolerance for losses: Low
• Vehicles to consider: Treasury bonds and FDIC-insured CDs with maturities corresponding to the date you need your money

Example 4. Near Term Allocation in Long Term Funds

• Daily liquidity need: Low
• Tolerance for losses: Moderate
• Vehicles to consider: A range of bonds and/or bond funds representing various credit qualities and short durations

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