Physical Cash vs. TBills with no interest

[Bean]

With TBills paying basically nothing or going negative, why even buy them?  Does physical cash win right now?  As of right now the only risk I see to cash on hand is theft, outside of that it is better in every way to digital money that pays nothing.

[dualstow]

If the cash portion is $1,000, I can see physical cash. If it's $100,000...that's a lot of paper. And when the time comes to deposit that money so that you can buy other assets, well. Don't businesses that even legitimately deal with cash regularly attract the attention of the government? I'm less anti-gov't than most people on this forum, I think, but it does look like a hassle.

How about three-year notes? And, I think I see Sophie headed this way with a pennant that reads I-BONDS!!

[sophie]

Ha!

We had a thread on keeping physical cash around, and a lot of people do keep a sizeable chunk on hand.

I guess it's all about what you're most comfortable with.  I'm personally more comfortable with T Bills than with a large pile of cash because of the possibility of theft, not to mention that walking into a bank with a big pile of bills is a really good way to attract unwanted attention.

And yes, there are investments (3 year treasuries, I Bonds etc) for "deep" cash that yield enough interest to be worthwhile.  But those should be no more than 1/3 - 1/2 your total allocation, i.e. you shouldn't need to touch them during a rebalance.

[Alanw]

I moved my cash out of SHY into an FDIC insured MM account with check writing privileges paying .65%. Not as safe as T-Bills but still backed by the Government and I am earning something rather than nothing.

[barrett]

I like having cash on hand. I don't go overboard but I also think there are advantages to having a cash stash. In a panic, don't expect to be able to get much from the bank. But, when considering theft, it's also a question of total amount of assets. For example, you don't want $10,000 in cash in your underwear drawer if your net worth is $20,000.

As to your question, Bean, having some T-Bills or a money market fund in your brokerage account(s) sure makes rebalancing a cinch. Actually from my experience, holding some in a money market fund is great if you want to be able to make a quick transaction. I think with Fidelity that when selling T-Bills, the sale takes a day or so to settle.

[Reub]

I moved my cash out of SHY into an FDIC insured MM account with check writing privileges paying .65%. Not as safe as T-Bills but still backed by the Government and I am earning something rather than nothing.

Ally Bank is paying 0.85% MM with check writing and FDIC insurance.

[barrett]

Reub,

Any catch with Ally Bank? I just looked them up and see that there is also "No minimum deposit to open" &
"No monthly maintenance fees." How are they able to offer that rate of return? Thanks.

[dualstow]

Additionally, see Craig's admonition against chasing yield. It's in the comments section below this blog entry, in his response to Chris.
https://web.archive.org/web/20160324133 ... -approach/

[sophie]

Reub,

Any catch with Ally Bank? I just looked them up and see that there is also "No minimum deposit to open" &
"No monthly maintenance fees." How are they able to offer that rate of return? Thanks.

I keep a checking & savings account (0.9%) at Ally.  They're an online bank with no brick and mortar buildings or ATMs to maintain.  Other banks following that model have similar rates (GE Capital, American Express Personal Savings, Barclay's, Synchrony etc).

I wouldn't keep all my cash there though.  The bump in interest rates feels good, but it just isn't enough payback for the added risk.  Even though the account is FDIC insured, that may be small comfort if another 2008 hits and your accounts are frozen.

[barrett]

When I see rates like .85% or .9%, I immediately think about what $100,000 would generate over a year. At .85%, you get almost $2.33 per day. Big whoop. Or, to look at it another way, you can double your money in 84 years. In a way I am lucky to have grown up during the 1970s because I can remember the feeling of getting 5% or 6% interest on a passbook savings account. Never mind that I was still getting shafted by my bank. That at least helped me internalize the idea that saving money is good.

[Reub]

No catches with Ally. They are rated as a solid bank, FDIC insured and I have never had a problem with them. Like Sophie said, they have no brick or mortar so we reap the savings. Why settle for less?

[LC475]

As of right now the only risk I see to cash on hand is theft

Yes, that is the big risk.  Also fire, or other ways to lose it.

outside of that it is better in every way to digital money that pays nothing.

In what ways, specifically, do you judge it to be better?

[MachineGhost]

Ally Bank is paying 0.85% MM with check writing and FDIC insurance.

Barclays Savings still beats that at .90%!

[MachineGhost]

Speak of the devil, just got this e-mail in a few minutes ago:

Great news, rates have gone up.

That's right. We are excited to let you know about the rate increase for your online savings account.

Here are the details, on 12/15/2014 the Annual Percentage Yield (APY) on your Online Savings account increased from an APY of 0.90% to the new APY of 1.00%.

Is this the beginning of "Tight Money" that we all fear???

[Reub]

Ally is up to 0.99% which sounds a lot higher than 1.00% any day.

[Mark Leavy]

Back to the OP's question.

Throw some vacuum sealed bags of greenbacks in with your physical gold.  I think having several months of living expenses in vacuum sealed FRN's is a reasonable allocation of the PP cash.

[MachineGhost]

Back to the OP's question.

Throw some vacuum sealed bags of greenbacks in with your physical gold.  I think having several months of living expenses in vacuum sealed FRN's is a reasonable allocation of the PP cash.

Whats with the vacium sealing?  I just bought the latest generation FoodSaver a few weeks ago!  Got a great deal on it, just like the $99 robot vacuum today that I've been waiting ages for and which I tried to share with everyone here, but it sold out within 10 minutes.

[Mark Leavy]

Whats with the vacuum sealing?

Paper/Cloth is organic and subject to moisture and oxidation.  I like to throw a packet of desiccant in before vacuum sealing.  The Feds use some pretty high quality paper, but... the insurance is cheap.

[Stewardship]

How about Treasury Zero-Percent Certificate of Indebtedness (C of I) in place of Tbills with no interest?

https://www.treasurydirect.gov/indiv/he ... rnMore.htm

Aren't these technically more liquid than Tbills and safer than FDIC-insured accounts?