USE A MONEY MARKET ACCOUNT WHILE YOU WAIT FOR HIGHER RATES
If you have money that you want to invest safely, you are no doubt wondering when will interest rates go up? We are halfway through 2010 and interest rates remain as low as ever which presents a problem for those who want to make money without risking it like you would in the stock market.
As I write this, stocks are down another 229 points and the Dow is hovering right around 10,000. It hasn’t been a good year for stocks and nothing with the economy really points to things getting better any time soon. Some of us just don’t want anything to do with stocks right now and that leaves us with only one option: interest income.
Most people get their interest income from bank CD’s or Treasury bills. They are totally safe (FDIC) and the most popular ones are the 1 year variety. I don’t like to lock up my money for longer than a year at a time and I think many others think that way as well.
Right now if you look online, you will see that the best rates you can get for a CD are between 1% and 1.5% which is not much at all. I mean seriously, if you had one million dollars all you would get is $15,000 in interest at the top rate for a 1 year CD? Who said “time is money”?
The best money market interest rates are not far behind at about 1.35% and with a MMA your cash is not locked in for a year or any period of time. That is the biggest advantage of money market accounts: you can get a decent interest rate from them and your money is 100% liquid at all time.
Interest rates will have to go up sometime and whether it is this year or 2011, you need a place to park your money where you can get to it. Not everyone is willing to hand their money over to the Treasury or a bank for a set period of time and if you are one of those people, you should take a look at the money market rates in your area and online.
At this time, the only way you can get the best money market rates is to go online. It is unlikely that you will find a local bank in your city that offers as high a rate as you will be able to find on the Internet. Of course, for many there is a comfort issue and they prefer investing their money with a bank or institution where they can actually walk in and talk to someone. If you send your money to a bank you find online, you might have less of a feeling of security which is an issue for some.
In conclusion, if you are willing to do the research online, you will be able to find money market interest rates that rival those of 1 year CD’s and Treasury bills. It is something to consider if you don’t want to tie your money down in case rates do start going back up again.
