DON’T HOLD CASH: Use THIS Instead

What's up you guys, it's Graham here.

So, this is one of the few videos out there that literally applies to everybody watching. That's right, even you! The reason why is because if you have any amount of cash whatsoever, most likely you're losing money without even realizing it.

So, if you just watch this video to the very end, two things are going to happen. First, I will hopefully convince you why holding cash is one of the worst things that you can do, besides Bitconnect and buying avocado toast, and how this actually ends up costing you money. Secondly, I'll give you four much better places to put your money that'll actually make you money for the most part, completely risk-free.

Okay, so, first things first: holding cash is bad. Now, what I mean by holding cash—I don't quite literally mean holding cash. Don't take that term literally. Instead, I'm referring to either keeping a ton of cash under your couch, or a mattress, or something because you don't trust the banks, or putting all of your money in a checking account or regular savings account, which is unfortunately what most people end up doing. That unknowingly ends up costing them a lot of money. Don’t do that!

And this is why you should avoid that. It's one super scary word, and that word is inflation. This basically just means that the value of your money decreases every single year because, summed up, the country ends up printing way more money than there is value every year. So basically, each and every year your money is worth less and less, and the purchasing power of your money over time starts to decrease with inflation.

As we can see from this chart right here, I'll go ahead and put it on the screen right now: inflation generally averages about 2% per year. Sometimes it's slightly higher, and sometimes it's slightly lower. So, if we just go with their average of 2% inflation, this means that if you keep a hundred dollars in cash, let's say under a mattress or in a checking account, in one year, on average, the purchasing power of this money for one year is only going to be worth about 98 dollars.

We can fold this back: 98 bucks. Then the year after that, another 2% inflation; now it's only worth—well, there we go—96 dollars. And that just means that you're losing a little bit of money every single day that goes by, thanks to inflation, until eventually down the line your $100 has the same purchasing power as $20 has today.

Anyway, point being, in probably 99.999% of situations out there, if you just keep your cash sitting around doing nothing, chances are you lose money. If you just keep your cash in a checking account, chances are you're losing money. If you keep it in a normal savings account, chances are you're also losing money.

So anyway, with that said, these are the best four options for you to be able to avoid that awful money-draining trap. I'll start off with the lowest risk accounts first and then end with the highest yielding accounts to get the best returns possible while still giving you access to your money when you need it.

So, let's get into the video. The first place you can put your money is in a high interest FDIC insured savings account. Pay attention there; note I said FDIC insured savings account. Hint, hint! Yeah, that was just a pretty dumb jab at Robinhood if you didn't catch that. But anyway, lame jokes aside, there's some pretty decent offers going on right now with high interest savings accounts.

Now, since I last made a video on this topic about a month ago, rates had ended up going up, and I found the 4 best current high interest savings accounts for you to choose from. And this is what they are: first, we have Ally Bank offering a whopping 2.2% return on their savings account—zero minimum, zero fees. Just sign up for the account and get that sweet, sweet 2.2%. This is the account I personally use for myself for the last few years, and I absolutely love them.

And Ally, by the way, if you're watching this, I've given you a lot of free promotion lately, so if you're interested in sponsoring the channel, here I am! Any any day now, alright!

So anyway, now the second option beats Ally by just a little bit, and that is Marcus by Goldman Sachs, offering 2.25% interest. And again, just like Ally Bank, there are no minimums, there are no account maintenance fees, there are no like crazy weird fine print—just put in your money and enjoy that 2.25% return.

Now, the third option goes even crazier than that, and is, as usual, PNC Bank, which is offering 2.35% interest on their savings account. Again, as the last two: no minimums, no crazy fees, nothing weird about this account—it’s, you know, pretty straightforward. Now, of course, the only downside I found with this account is that it’s only available to people who live in a state that does not have physical PNC branches in it.

This 2.35% interest rate is really meant as a way to gain customers in other states where they're not located. Unfortunately, for anyone who is located in one of their own states, you can't get this account. So, depending on where you live, this may or may not end up working for you.

And fourth, I found one that's even crazier than PNC Bank, which I didn't think was possible, but here you go: CIT Bank is offering 2.45% interest on their savings accounts with accounts that have more than $25,000 in them. That's right, 2.45% interest with no crazy monthly maintenance fees, no weird fine print—just keep a minimum balance of $25,000.

And I got to say, from all the research I did, this seems like the best, cleanest account out there without having to worry about like not having a good bank or having the rate change on you as soon as you put your money in. It seems like this one is pretty legit as long as you have the $25,000 to deposit.

So, secondly, if you want a slightly higher return and you don't need immediate access to your money, the next option would be using a CD. No, this doesn't stand for a compact disc; this is just a certificate of deposit. This is basically just a savings account with a fixed date for withdrawal, and most CDs that you see out there have fixed terms of one to five years, which means you'll end up locking up your money for that amount of time.

If you're the type of person who knows you're not going to be really needing the money for the next one to five years, this could be a pretty good option. And these are the four best highest yielding CDs that I could find right now, as of February 2023.

First, we have the almighty Ally Bank CD rate, which again—here we go—free promotion for Ally. They're offering right now 2.3% on a no-penalty eleven-month CD. This means that you can withdraw your money at any time after six days without any penalty whatsoever, and still receive the interest that you're owed.

So for the way I see it, this is pretty much just a risk-free return and offers a slightly better return than what you would get with the Ally Bank savings account. But my thinking with this is that if you're doing an Ally Bank CD, you probably just may as well go with CIT Bank or PNC Bank, which is giving a slightly higher return on a savings account and you won't have to spend time opening up a CD.

But secondly, we have a much better option than that, and that is the Capital One 360 CD. They're offering right now 2.7% on their 12-month CD. It's not bad; it's a fair option, but there are other better options out there.

The third option to this is Marcus by Goldman Sachs, who loves beating out their competitors just by a little bit, and they offer 2.75% on their 12-month CD. And I got to say, this one looks pretty good if you know you're not going to be needing your money in the next year. This is probably one of the best options out there.

And of course, as you guys all know, I always save the best for last. Right now, Synchrony Bank is offering a 12-month CD at 2.8% with a $2,000 minimum deposit. And from all the research I ended up doing, this looks like probably the best option out there for a 12-month CD.

So next, we have our third option out there that very few people know about, very few people discuss, but it's probably one of the best options out there; and that is smashing that like button if you haven't already! Just kidding! But if I fooled you, still make sure to hit that like button, okay?

No, but for real though, the actual third option here that not many people know about is putting your money in what's called Treasury Bills. This is basically just a loan you give to the government, and in return for loaning your money, they pay you back with interest.

And because you're lending money to the government, it's pretty much a risk-free return because they can always just print more money to go and pay you back. Yay for government printing money! But the really amazing thing with doing this that not many people know about is that with Treasury Bills, the income you get from this is not taxed on a state or local level.

So, for my fellow people here in a high income tax state like California or New York, this could end up saving you a ton of money. So, the way this works is that you can go on TreasuryDirect.gov, make an account, and then purchase four-week Treasury Bills, which currently pay about 2.48% interest annually.

You can also set this up to reinvest your money automatically so you're constantly getting the highest rate of return possible without paying taxes on a state or local level on the money you make, without even thinking about it. And yes, with doing this, you'll tie up your money for four weeks at a time, but worst-case scenario, you've just got to wait four weeks to get your money back. It's not really the end of the world, and you'll get it all back with a pretty high rate of return.

When it comes to making a risk-free return, it doesn't really get much better than that! Or wait, or does it—introducing our last option out there! This has the highest return from everything I've listed so far, but it comes with a little bit of a risk—not a lot of risk, but still a little risk.

And that is putting your money in a bond. A bond is pretty much just an IOU from a government, state, city, business, or anything else like this, and for the most part, it's relatively safe. For instance, we have the Vanguard High-Yield Corporate Fund Investor Shares—that's a lot to say! This pays a whopping 6.1% right now, which works out to be 5.87% after fees.

Now, of course, this is not a risk-free return because the price of the bonds could end up going down, the payout could go down, or the payout could go up, and the price goes up. I mean, it could go really in either direction. But for someone out there who's willing to take on a little bit more risk for a slightly higher return on their money, this could be a pretty decent option.

You also have quite a few other options out there, like you have the Vanguard Total Bond Market Index. After expenses, you're looking at about a 2.9% annual return, and this one is much less volatile. But, like I mentioned, bonds can change in price just like investing in the stock market.

Although for the most part, they tend to be relatively stable, it's just they could go down in price. But nonetheless, this could still be a really good option for anyone who wants to take a little bit of risk to get a slightly higher return, while still also having access to your money immediately when you need it.

So there you go: don't hold on to cash because you will lose money to inflation. Instead, use a high interest savings account, a CD, use Treasury Bills, or invest in a bond so that way you don't lose any money whatsoever to inflation while still having access to your money when you need it.

All the options that I mentioned here are really easy to do, and they'll take you under 10 minutes to go and set up and do. So that's a small little price to pay to preserve your wealth, and that way you will have more money left over anytime you make other investments, like buying avocado toast!

Before people start complaining, because no joke, in the last video I made about savings accounts, I would have people in the comments getting very triggered, and they would write, "But Graham, why would you ever invest your money for 2% a year when I could trade penny stocks and make 50% returns every single week?"

Just like, I'm so boring! 2.45% of your money is not about trying to get the highest return possible or trying to squeeze the most amount of value from each dollar as you possibly can. For instance, this strategy works perfectly if you're saving up a few years to buy a house, or if you're saving up to make a larger investment, or maybe with your emergency fund or anything like this.

And yes, you know what? I totally agree with this—that about 2% of your return is going to be eaten away by inflation, and that really only leaves you with like 0.2 to 0.45% return after everything is said and done. But again, this is more about preserving your wealth and not losing 2% per year, because doing this and actually making a little money is a lot better than losing value every single year.

So with that said, you guys, thank you so much for watching! I really appreciate it. As always, if you made it to the very end and you haven't yet, smash that like button! Make sure to do that now. And also, if you've not already subscribed yet, just click the little subscribe button. It takes you like a millisecond to go and do that, and you know you enjoy videos like this! I post three times per week.

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