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Helping parents with investments

2,604 Views | 15 Replies | Last: 5 yr ago by Ragoo
Tree Hugger
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AG
I recently found out that my mom has about $60K in a typical savings account at her bank. I know she wants to keep it available for use in case of an emergency, but is there some way she can invest this in a manner where she can make more than the pittance of an interest rate that most major banks offer, but still have immediate access to it if necessary?

I'm not trying to pad any kind of theoretical inheritance, I would just like to help her make some money off of what she has to make her life more comfortable.

I'll hang up and listen, I just figured I would get more honest advice here than if I just googled and ended up with links to opportunities that may not be the best for her.

Thanks folks.
IrishTxAggie
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AG
Money market account?
xjrayx
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AG
CD ladder
TXTransplant
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Capital One Bank has a money market fund that's currently earning 1.75%. It's limited to 6 transactions per month, I think. That's where I have my emergency savings. It's not much, but it's better than what banks like Wells Fargo are offering.
Tree Hugger
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AG
Can you explain money market and CD ladder?

I load up my 401k to maximize the company match, but am otherwise an investing moron. Hell, there is plenty of opportunity for me to learn here as well.
Red Pear Realty
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AG
Marcus by Goldman Sachs or a CD Ladder.

Marcus is an online savings account that currently offers 1.85% interest on deposits. Its just like the savings account with her bank, except earns better interest. Transfers to/from checking take 2-3 days.

A CD ladder is just what it sounds like. You deposit money into CDs of varying durations with the intent of maximizing both flexibility as well as returns.

https://www.nerdwallet.com/blog/banking/building-perfect-cd-ladder/

Edit: Just realized Marcus is at 1.85%
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xjrayx
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AG
Money market account is going to be more liquid but a little bit lower interest. If she thinks she's going to need it, then it's probably best to keep there.

A CD ladder would be structured like so:

$5k - 1 year CD @ 2.4%
$5k - 2 year CD @ 2.5%
$5k - 3 year CD @ 2.55%
$5k - 4 year CD @ 2.6%
$5k - 5 year CD @ 3%

At the end of each year the CD can be cashed (if the money is needed) or you can roll it over to a new 5 year CD.

The downside to the ladder is that there is usually a penalty if you withdrawal early.
Tree Hugger
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AG
Thanks for the clarification.

And all this time I thought the penalty is if you withdrew late? (GB humor)
fourth deck
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At the very least that amount of cash should be sitting in a high-yield online savings account. There are many good ones out there now: AMEX personal savings, Discover, Synchrony, Marcus, Ally, CapitalOne, etc. Right now these will get you ~1.75-1.85% in a savings account which you can withdraw from and transfer to a checking account at a conventional bank in one or two day's time with no penalty. Can do a CD ladder to eek out another 1% but then there is the penalty for early withdrawal.
TXTransplant
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The Capital One money market is essentially the same as a high yield savings account, the number of transactions per month is just limited. So, you can't use the account to pay bills and such. But if this is emergency savings, you wouldn't need that anyway. It's FDIC insures just like any other savings account.

Here is a link explaining the account and how it differs from a regular savings account.

https://www.capitalone.com/bank/savings-accounts/online-money-market-account/#id_why360moneymarket

JSKolache
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AG
Put 30-40k of that in a no-fee Robinhood account & buy BRKB (or maybe some ETFs.)

Transfers to/from RH to bank accounts take a few business days, so just factor in a few extra days time if she needed to sell shares move cash back in to the bank.
Ribeye-Rare
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fourth deck said:

At the very least that amount of cash should be sitting in a high-yield online savings account. There are many good ones out there now: AMEX personal savings, Discover, Synchrony, Marcus, Ally, CapitalOne, etc.

Correct, and I would add Sallie Mae to that list. It's currently at 1.90% APR and permits paper checks for the old school folks, like my mother.

Sallie Mae Money Market


Granted, no one gets rich at 1.90%, but it's not that far removed from some of the commercial RE cap rates I see these days, which amazes me.
Baby Billy
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AG
JSKolache said:

Put 30-40k of that in a no-fee Robinhood account & buy BRKB (or maybe some ETFs.)

Transfers to/from RH to bank accounts take a few business days, so just factor in a few extra days time if she needed to sell shares move cash back in to the bank.

Jesus. No. Please don't do this
IrishTxAggie
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When the BRKB bubble bursts after Buffett dies, it ain't gonna be pretty.
Ragoo
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IrishTxAggie said:

When the BRKB bubble bursts after Buffett dies, it ain't gonna be pretty.
the bubble won't burst.
IrishTxAggie
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AG
Ok. Maybe bubble burst isn't the right analogy here. I think there will be a sizable selloff and pullback though.
Ragoo
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IrishTxAggie said:

Ok. Maybe bubble burst isn't the right analogy here. I think there will be a sizable selloff and pullback though.
i don't at all. Warren doesn't manage the day to day operations of the companies he owns. He is sitting on a huge pile of cash he can't really deploy. Investors today know he is going to die. If his death is a risk then buffet style investors wouldn't be investing in buffet.
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