The Ultimate Guide to Cash Management: Making the Most of Your Money

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With the highest interest rates in 15 years, investors have a real opportunity to receive a return on their cash.

But, many are confused with the various accounts, products, and offerings available to manage their cash.

We recently had a client reach out and compare a couple of different cash management options. As we helped them consider the benefits and drawbacks of each, we realized this is likely a concern for our other clients. 

The reality is cash management can be an essential part of your financial plan, making sure your hard-earned cash is working as efficiently and effectively as possible on your behalf.

To help you navigate the landscape of options, here’s a guide that explains how to manage your cash and what types of accounts or products you can use.

How to Manage Your Cash: 6 Options to Consider

When it comes to cash management, there are several products and options available. It’s essential to understand the pros and cons of each so you can choose the best one for your situation.

Checking Account Savings Account High-Yield Savings Account Money Market Account Certificates of Deposit Cash Management Account
Interest Rate Variable & Low Variable & Low Variable & High Variable & High Fixed & High Variable & High
Federally Insured Yes Yes Yes Yes Yes Yes
Checks Unlimited No No Limited No Sometimes
Debit Card Yes No No Yes No Sometimes
Withdrawal Restrictions None None None None Yes None

1. Checking accounts

A checking account is a deposit account that allows you to receive, withdraw, deposit, and transfer money. A major benefit is it comes with debit cards and checks, making your funds accessible if needed. 

It is easy to open, use, and manage and is insured for up to $250,000 in the US. Disadvantages include low-interest rates and sometimes high fees if you don’t meet minimum balance requirements. In addition, unlike some savings products, checking account interest rates fluctuate depending on the interest rates. 

2. Savings accounts

A savings account is a deposit account that offers a safe place to store your money while earning interest at the same time. 

These accounts are Federal Deposit Insurance Corporation (FDIC)-insured for up to $250,000, so you can rest easy knowing your money is protected from loss. But, like checking accounts, savings accounts typically have low-interest rates and may come with high fees if your account does not maintain a minimum balance.

Savings account rates also fluctuate with interest rates, and the account does not come with debit cards or check-writing privileges.

3. High-yield savings accounts

High-yield savings accounts offer higher interest rates than traditional savings, so you can earn more interest. Rates vary by bank, but on average, high-yield savings accounts pay around 11 to 14 times more than your typical savings accounts. They may also come with fewer restrictions and fees.

In addition, there are no lock-up periods on your money, making them highly liquid and easily accessible. They are also FDIC-insured up to $250,000. Like traditional savings and checking accounts, high-yield savings account rates fluctuate. 

However, high-yield accounts do not have debit cards or check-writing privileges, so if you want to use the money, you’ll need to transfer it to a checking account or withdraw cash from an ATM.

4. Money market accounts

Money market accounts offer higher interest rates than checking or regular savings accounts but often lower rates than high-yield savings accounts. 

They also offer deposit insurance up to $250,000 in the US. They are a good option for those who want easy access to funds as they typically provide debit cards or check-writing privileges. The disadvantages include high minimum balance requirements and higher fees than a typical high-yield savings account. Rates also fluctuate with current market interest rates.

5. Certificates of deposit

Certificates of deposit (CD) generally offer higher interest rates than checking or savings accounts but come with fixed rates and require you to keep your money invested for a certain period. 

The duration or amount of time you must keep your money in the CD ranges from 3 months to 5 years. The longer the term, the higher the interest rate you’ll earn on your funds. While the interest rate is typically higher than other cash management options, CDs are not liquid, and early withdrawal penalties may be imposed if you take out funds before the term’s end. 

So generally, these are an excellent option for anyone with cash that they won’t need to access for a specific period and are willing to lock up for a decent return. That said, many people hold cash as an emergency fund that they can access immediately, making CDs a poor option in that situation. 

One interesting difference about CDs is that rates do not fluctuate automatically like other accounts. So, if you lock in a 5% return for a 12-month CD and interest rates go down, you will still receive a 5% return for those 12 months. Alternatively, if rates increase during that time, you are still locked into 5%; this can be both a benefit and a drawback.

6. Cash management account

Lastly, a cash management account (CMA) is a type of savings account not offered by traditional banks and credit unions but by non-bank institutions such as brokerages and robo-advisor platforms.

These accounts often deposit your funds with partner banks, enabling greater FDIC coverage for larger deposits than the standard $250,000 limit. For example, a typical CMA may use four to six different banks on the back end, ensuring a high return on your cash while also receiving $250,000 of FDIC coverage per bank.

Although these accounts offer interest, the rates are usually slightly lower than those of high-yield savings accounts. As a result, these are generally best for investors who have a lot of cash and want the simplicity of depositing into one place while receiving a higher amount of FDIC coverage, even if it means a slightly lower interest rate.

Tencap Wealth Coaching is here to help

Ultimately, the best cash management strategy involves understanding your financial goals and selecting the product or account to help you reach them.

With this guide, you now have the knowledge and tools to make the most of your money and make intelligent, informed decisions about managing cash effectively. From checking accounts, high-yield savings accounts, and money market accounts to CDs and CMAs, different options are available for individuals looking to maximize their financial well-being. 

Each type has its benefits and drawbacks, so it’s important to understand them to choose the one that works best for you and your finances. 

If you want to work with a financial planning professional to help you understand your options and effectively manage your cash, Tencap Wealth Coaching is here to help.

At Tencap Wealth Coaching, we’re focused on helping you achieve all your financial goals and more through academically sound financial planning. From investment management to retirement planning and tax strategies, we are here to manage the complexities of your money and allow you to relax and enjoy life. Learn more or schedule an introductory meeting below.

Schedule a meeting.

Photo of Nick Carrigan
Nick Carrigan
Wealth Advisor

Nick trains and develops families in creating, maintaining, and growing wealth. This includes educating clients on the science and academics of investing, comprehensive financial planning, and ongoing coaching to ensure discipline for a lifetime. Nick has seen this create incredible levels of freedom, fulfillment, and love for the families he works with.

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