Cash Is No Longer Trash

We find low-risk yields that rival dividends and can keep up with inflation.

- John Waggoner​​​​​​

For savers, searching for yield over the past decade has been like fishing in the Sahara. But the Federal Reserve Board has been pushing up short-term interest rates since December 2015, and savers are finally reeling in some nice catches.

Yields on most savings vehicles, such as bank deposit accounts and money market mutual funds, track the Federal Reserve’s federal funds rate. For seven miserable years, from 2008 to 2015, the fed funds rate was tantamount to zero—and that’s about what you got from your savings.

As the Fed has raised its benchmark rate, savings rates have risen with it. “This is a huge revelation to my clients,” says Jonathan Pond, a Newton, Mass., certified financial planner. “They are actually earning money on cash.”

Kiplinger expects the Fed to raise rates three times in 2019. Although interest rates on savings are still low, they have caught up with inflation and beat the dividend yield of Standard & Poor’s 500-stock index. And although cash may not yet be king when it comes to yields, it’s important to remember that the income it generates comes with little or no risk—providing a bit of respite from volatile stock and bond markets. We found a number of options that will be a big improvement over your piggy bank. Yields and prices are as of November 9.

MONEY MARKET ACCOUNTS

Don’t be discouraged if yields on your bank’s savings account and money market deposit account are still at rockbottom. The national average savings account yields a miserly 0.09%, and the average MMDA pays just 0.20%, according to Bankrate.com. But you can find higher yields by shopping around—particularly at online banks and credit unions, which have lower overhead than traditional banks and can afford to pay a bit more.