I was also wondering as I try and tidy up all my loose ends / mismanaged money. With regards to a cash account / emergency fund I know the interests for savings account a pretty dismal but it looks like Ally offers a consistent and competitive saving account. Currently offering 0.50% (APY) does anyone here use them and have feedback and what is the general thoughts on using a savings account for this? or is there a better option to keep my money working?
Thanks,
Chris.
I've used Ally in the past for cd ladders and savings accounts back when I didn't have a Vanguard account, our cash flow was very tight, we had a lot of unavoidable debt due to needing to purchase a second house and car, our emergency fund/slush fund was small (less than 50K), and I could not under any circumstances afford to lose principle. That lasted about 5 years, and they (Ally) were totally fine, BUT with the caveat that I never needed to do any customer interface with them b/c my needs were very simple. So I don't know how their customer service is.
However, as soon as our cash flow situation loosened up and we had a sizeable chunk of cash, I opened a brokerage account at Vanguard (I had already set up IRAs/Roth IRAs with them), closed the Ally account, and put all that money in a regular brokerage account, but with a more conservative mix than our very aggressive retirement accounts (so while we've lost principle during drops, we don't lose enough to cause me concern). The money is still there and growing robustly, though less robustly than our retirement accounts.
Personally, I would only use savings accounts or cds if I had absolutely zero wiggle room for error or loss of principle (as in situation noted above, or if my income was extremely tenuous), or if the savings need was very short term. For example, we save about 12-15K/year ongoing in our credit union savings (interest is teeny), which we use to pay property taxes and income taxes and use as emergency funds to aid our poor parents and their ongoing but stochastic financial problems. We usually are dipping into that every 3-6 months, so it seems like too much of a pain in the ass to open a separate account (#lazy).
Beyond special circumstances like those described above, I want my money working for me, not sitting around just barely keeping up with inflation, so into a investment account it all goes. I also have extremely high risk tolerance and nerves of steel when it comes to investing. I laughed at the general panic during the 2008 and 2020 market crashes and tried to free up as much cash to pour into the market during those crashes as possible. I would NEVER panic and pull my money out during downturn unless I had absolutely no possible choice and needed it to feed myself and keep a roof over my head. YMMV.