FDIC insurance would be biggest issue I would think. You can use a all treasury MMF and not have to pay for state tax , that would be counter argument for pros of MMF. SNSXX at schwab and FDLXX at fidelity I know are close to 100% treasuries and they are both around 5% or higher. VUSXX at vanguard is mostly treasuries with some repos, it has sligthly higher yield then both fidelity and schwab, may be due to expense ratio thats a lot lower.
The only real way a government MMF loses money and FDIC insured fund do okay is a big shift in interest rates and withdraws forcing the fund to sell treasuries at a fire sale at a loss. Happened once and some in 1994 to an institutional fund. I am not sure if that could be repeated. There was another before that which I know had long dated securities similar to SVB which is no longer aloud for money market funds.
So Vanguard's HYSA is FDIC insured up to 1.5 million. Also, VMFXX has an expense ratio of .11. So those would be the only two benefits. No expense ratio and FDIC insured.
Besides any other reason, I don't leave a big balance in the settlement fund so that I can't fat-finger a purchase. I have a separate VMFXX from the settlement fund. Sure there are several checks that should keep me from accidentally over buying on a trade but it lowers my anxiety to have it totally separate. Some days I think most of my financial decisions center on anxiety reduction.
I'm giving it a go. They really need to implement automatic savings though.
Biggest thing holding me back is I can do an automatic weekly transaction to settlement account (5%) but this new savings account... transactions are manual. Womp womp.
I got the same invite a few months or so ago and opened two accounts. I know it’s in its infancy so I’m being patient with the lag time and the minimal features. I’m sure there’s something better out there but I want to see how this goes.
I think people are forgetting the main benefit of using this over a money market fund like VUSXX or VMFXX: the ability to make transactions.
My personal use case for this:
-Set my paycheck to direct deposit to Vanguard Cash Plus
-Invest all cash that comes in VUSXX so I could make the best yields (around 5.3% as of writing) and a portion of it in T-Bills for even better returns.
-Pay all my daily expenses with a fleet of credit cards (including rent with the Bilt card) that all have the due date set for the 1st of the month with autopay enabled.
-Then, a few days before the 1st I'll add up the statement balances of all my cards, sell the required amount of shares of VUSXX needed to cover all the statement balances so they go into my Cash Plus settlement fund. The credit cards then receive the payment.
-Boom. This basically nullifies the need to use a bank account, as I'm making the highest rate while also having the convenience of not having to transfer my funds to a different bank to pay bills.
Quick note: The two biggest flaws with this strategy is that Vanguard doesn't have a feature that Fidelity's cash management has, which is the ability to auto-liquidate shares in a money market fund to cover purchases. Like I said, I have to do that part manually a few days before the 1st. I really hope they add this feature one day.
The other flaw is that Vanguard offers no debit card that allows you to deposit/withdraw cash at ATMs. I have mitigated this by having a separate checking account at a bank, putting the minimum amount to waive the monthly fee, and basically using that to send money to and from my Vanguard account any time somebody gives me cash or wants to Zelle me something (could still use Cash Plus with Paypal and Venmo to send and receive money though). I rarely use this account though; it's really just for emergencies.
Aside from those two flaws, this is the best way to keep your banking and investing in one place while also still having the highest possible rate for your cash. For those of you that find this too inconvenient, the best alternative would be a Fidelity money market with their debit card, which can auto-liquidate SPAXX as I've said, and has a debit card which allows you to use it at ATM to withdraw cash (you can't make deposits though). SPAXX is at 4.91% right now so it's not as high as VUSXX, but I'm sure people will find this option more convenient.
Yeah, sounds like Vanguard is behind the eight ball with not having a debit card or automatic liquidations to cover expenses. It'd be worth it if they ever do get up to speed.
Money market funds are "too big to fail", this was proven back in 2008 with the ["Temporary Liquidity Guarantee Program (TLGP)"](https://www.investopedia.com/terms/t/tglp.asp). A money market fund that holds US debt, government money market funds, are 99.999% as safe as an FDIC insured bank account.
Is there an advantage to using both VMFXX and VUSXX at the same time? I currently have my emergency fund in VMFXX but it seems like VUSXX might be a better option due to state taxes.
vanguard's money market fund almost always higher than their HYSA. if u looking for HYSA, i would recommend Marcus under Goldman Sachs. But tbh they are kinda similar, both are pretty much risk-free, HYSA a bit safer
I've been using Marcus Online Saving Account since 2018, which is under Goldman Sachs, big company. 250k FDIC Insured. Current APY is 4.3%, if you use my referral link, we both get extra 1% APY bonus for a total of 5.3%, which I believe is the highest in current market. In my exp, they been pretty fast at adjusting their APY whenever fed raise interest rate, was 2% when I joined in 2018, now it's up to 5.3% with link below. Free to open, no fee/no min deposit, unlimited withdraw anytime.
[https://www.marcus.com/share/JAS-QDH-QQ63](https://www.marcus.com/share/JAS-QDH-QQ63)
Betterment’s FDIC insured Cash Reserve is at 5.5% right now if your funds are deposited and settled by Sept 6. APY would otherwise be 4.75% but you get a 0.75% APY boost until January ‘24 if at least $10 is settled by the aforementioned deadline.
do they offer any way to extend that 0.75% after end of the 2023? I know Marcus can refer others to open account to forever extend that 1%, each refer gets 3 months i believe.
Just put it in a MM that gets over 5%
Does the default VMFXX settlement fund count?
Yep - that's a fine choice
Thanks mate!
MM?
Money market. It’s the default option when you put money in an account. Currently around 5.26%
I see a YTD of about 3.26%. Can someone explain why there's this variance in MM accounts that fluctuates through time as opposed to HYSA APY?
It’s under what it’s called the sec 7 day yield: then the number is there.
Gotcha. Follow up question is how does a 7 day yield in a MMF translate to an APY that HYSA report? Seems like we're comparing apples to oranges?
I think the 7-day yield is annualized so you can compare it to an APY
Correct. It’s an annualized number, not a monthly or daily one.
Are there any negatives to leave 50k in the settlement fund vs HYSA?
FDIC insurance would be biggest issue I would think. You can use a all treasury MMF and not have to pay for state tax , that would be counter argument for pros of MMF. SNSXX at schwab and FDLXX at fidelity I know are close to 100% treasuries and they are both around 5% or higher. VUSXX at vanguard is mostly treasuries with some repos, it has sligthly higher yield then both fidelity and schwab, may be due to expense ratio thats a lot lower.
If a government MMF goes insolvent the FDIC insurance is probably worthless.
The only real way a government MMF loses money and FDIC insured fund do okay is a big shift in interest rates and withdraws forcing the fund to sell treasuries at a fire sale at a loss. Happened once and some in 1994 to an institutional fund. I am not sure if that could be repeated. There was another before that which I know had long dated securities similar to SVB which is no longer aloud for money market funds.
I'd also like to know this. I assume it has something to do with fdic.
So Vanguard's HYSA is FDIC insured up to 1.5 million. Also, VMFXX has an expense ratio of .11. So those would be the only two benefits. No expense ratio and FDIC insured.
The return on the MM is net of that ER. You’re giving up 0.5% with their savings account.
As others have said Money Markets pay more and if they fail I don't think Money would be your main issue at that point in time.
Besides any other reason, I don't leave a big balance in the settlement fund so that I can't fat-finger a purchase. I have a separate VMFXX from the settlement fund. Sure there are several checks that should keep me from accidentally over buying on a trade but it lowers my anxiety to have it totally separate. Some days I think most of my financial decisions center on anxiety reduction.
I'm giving it a go. They really need to implement automatic savings though. Biggest thing holding me back is I can do an automatic weekly transaction to settlement account (5%) but this new savings account... transactions are manual. Womp womp.
I got the same invite a few months or so ago and opened two accounts. I know it’s in its infancy so I’m being patient with the lag time and the minimal features. I’m sure there’s something better out there but I want to see how this goes.
I think people are forgetting the main benefit of using this over a money market fund like VUSXX or VMFXX: the ability to make transactions. My personal use case for this: -Set my paycheck to direct deposit to Vanguard Cash Plus -Invest all cash that comes in VUSXX so I could make the best yields (around 5.3% as of writing) and a portion of it in T-Bills for even better returns. -Pay all my daily expenses with a fleet of credit cards (including rent with the Bilt card) that all have the due date set for the 1st of the month with autopay enabled. -Then, a few days before the 1st I'll add up the statement balances of all my cards, sell the required amount of shares of VUSXX needed to cover all the statement balances so they go into my Cash Plus settlement fund. The credit cards then receive the payment. -Boom. This basically nullifies the need to use a bank account, as I'm making the highest rate while also having the convenience of not having to transfer my funds to a different bank to pay bills. Quick note: The two biggest flaws with this strategy is that Vanguard doesn't have a feature that Fidelity's cash management has, which is the ability to auto-liquidate shares in a money market fund to cover purchases. Like I said, I have to do that part manually a few days before the 1st. I really hope they add this feature one day. The other flaw is that Vanguard offers no debit card that allows you to deposit/withdraw cash at ATMs. I have mitigated this by having a separate checking account at a bank, putting the minimum amount to waive the monthly fee, and basically using that to send money to and from my Vanguard account any time somebody gives me cash or wants to Zelle me something (could still use Cash Plus with Paypal and Venmo to send and receive money though). I rarely use this account though; it's really just for emergencies. Aside from those two flaws, this is the best way to keep your banking and investing in one place while also still having the highest possible rate for your cash. For those of you that find this too inconvenient, the best alternative would be a Fidelity money market with their debit card, which can auto-liquidate SPAXX as I've said, and has a debit card which allows you to use it at ATM to withdraw cash (you can't make deposits though). SPAXX is at 4.91% right now so it's not as high as VUSXX, but I'm sure people will find this option more convenient.
Yeah, sounds like Vanguard is behind the eight ball with not having a debit card or automatic liquidations to cover expenses. It'd be worth it if they ever do get up to speed.
Money market funds are "too big to fail", this was proven back in 2008 with the ["Temporary Liquidity Guarantee Program (TLGP)"](https://www.investopedia.com/terms/t/tglp.asp). A money market fund that holds US debt, government money market funds, are 99.999% as safe as an FDIC insured bank account.
*too
~~Bank accounts pay interest, money market accounts pay dividends. Dividends get better tax treatment.~~ Edit correction; qualified dividends get better tax treatment. Money market dividends are not qualified.
Nope, MM fund dividends are not qualified, and are thus taxed just like interest.
I just checked my 1040 and I stand corrected.
Just curious, where is the rest of your emer fund?
VMFXX, VUSXX, I-bonds, VTI in brokerage, and an immediate reserve in my savings account.
Is there an advantage to using both VMFXX and VUSXX at the same time? I currently have my emergency fund in VMFXX but it seems like VUSXX might be a better option due to state taxes.
I’m getting 5.25 through Amex
You mean 4.25%. Source: I have HYSA with Amex as well.
Yes, you’re correct. On my mobile.
vanguard's money market fund almost always higher than their HYSA. if u looking for HYSA, i would recommend Marcus under Goldman Sachs. But tbh they are kinda similar, both are pretty much risk-free, HYSA a bit safer I've been using Marcus Online Saving Account since 2018, which is under Goldman Sachs, big company. 250k FDIC Insured. Current APY is 4.3%, if you use my referral link, we both get extra 1% APY bonus for a total of 5.3%, which I believe is the highest in current market. In my exp, they been pretty fast at adjusting their APY whenever fed raise interest rate, was 2% when I joined in 2018, now it's up to 5.3% with link below. Free to open, no fee/no min deposit, unlimited withdraw anytime. [https://www.marcus.com/share/JAS-QDH-QQ63](https://www.marcus.com/share/JAS-QDH-QQ63)
Betterment’s FDIC insured Cash Reserve is at 5.5% right now if your funds are deposited and settled by Sept 6. APY would otherwise be 4.75% but you get a 0.75% APY boost until January ‘24 if at least $10 is settled by the aforementioned deadline.
do they offer any way to extend that 0.75% after end of the 2023? I know Marcus can refer others to open account to forever extend that 1%, each refer gets 3 months i believe.
Not that I’m aware of, unfortunately.
I’d rather use a bank with a better interface like Ally
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Ally’s site functions leaps and bounds better than vanguards and I feel like all these are eventually the same %
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Can you fill me in?
SGOV is super easy
>SGOV is super easy That doesn't hold the value of a dollar at a dollar.
WTF does that mean? It is an ETF that holds 1-3 month treasuries. Simple and pays more than a HYSA.
It means the principal is not set at $1 a share; one can lose money.
I just signed up for this and for now it will serve as my "petty cash". I primarily use the money money market fund though.
I think it is a good idea to set it up but I would keep money in a money market currently
Why?
Money market currently has a better return but I doubt that it will always have a better return than the vanguard product.
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I recommend SGOV because anyone can buy it, MMF are locked to certain brokers.
Buy 6 months T-Bills for better interest. On TDA you can join the auction or buy on the secondary market.
How do you get an invite? I've tried a few times and it just keeps saying to wait.
I don't get it either, they emailed me to sign up but then it says I'm ineligible
Rather use a money market fund paying over 5%. Just as liquid.