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Wealthfront high yield savings account

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  • Avatar snowbrody 
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    Status: Physician
    Posts: 6
    Joined: 05/26/2019
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    Hi

    Has anyone used welathfront high yield savings account ? I am planning on parking my emergency funds there but it sounds too good to be true. Am i missing anything here or this is really safe ?

    #224026 Reply
    Avatar StateOfMyHead 
    Participant
    Status: Advanced Practice Provider
    Posts: 94
    Joined: 01/01/2019

    At a quick glance I’m not sure I would be comfortable with my money not being FDIC insured or earning interest until sold to another firm.

    #224028 Reply
    Avatar snowbrody 
    Participant
    Status: Physician
    Posts: 6
    Joined: 05/26/2019

    This is actually FDIC insured upto 1 million

    #224038 Reply
    Avatar pierre 
    Participant
    Status: Resident
    Posts: 164
    Joined: 02/01/2016

    Do you have other accounts with them?

    I use Ally, but it looks like wealthfront currently has a slightly better rate ( 2.2 vs 2.51).

    #224042 Reply
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 118
    Joined: 06/10/2019

    Wealthfront has a very good rate there. I’m getting 2.4% APY on a savings account at CITbank.

    #224068 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3945
    Joined: 01/08/2016

    VMMXX is 2.36%. i dont see a reason to change.

    #224090 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 2582
    Joined: 09/18/2018

    One needs to have a lot allocated to cash for fractional differences to amount to much. But that deflects to a completely different discussion that was previously beat into the ground.

    #224092 Reply
    Liked by jfoxcpacfp
    Avatar nephron 
    Participant
    Status: Physician
    Posts: 121
    Joined: 05/09/2019

    I don’t understand everyone is getting excited about these 2% high yield savings account.  After taxes, it doesn’t come out to very much.   It’s fine for an emergency fund, but I certainly wouldn’t put anything beyond that.

    #224174 Reply
    Liked by Drsan1, jfoxcpacfp
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 118
    Joined: 06/10/2019

    I don’t understand everyone is getting excited about these 2% high yield savings account.  After taxes, it doesn’t come out to very much.   It’s fine for an emergency fund, but I certainly wouldn’t put anything beyond that.

    Click to expand…

    Those small difference are something most won’t even pay attention to. For billionaires it benefits them disproportionately, whereas you and I it is minimal income we would just spend and get little out of it. Part of, among other things, how the wealthiest keep getting disproportionately wealthier.

    For me, I have about $2M in emergency, so that’s enough where I get perhaps $10K/year on the difference between 2 and 2.5%. Not everyone would find that worth the effort.

    For me, the effort is not about the reward here, but about good financial habits. A good habit here may only benefit $10K/year, other good habits can yield tens or even hundreds of thousands. My wife wonders why I put so much effort into saving a couple of bucks on paper and paper clips. It’s because in reality I buy over $500K/year worth of “stuff” and so you can see how 10-80% savings can become substantial, especially when those savings are wisely invested.

    Putting small interest rate differences another way, I recently borrowed $2.3M for a commercial office building – you better believe I had the lenders fighting the interest rate war online. No doubt I saved over $30K/year over taking the first offer based on what I ultimately got. Would I do the same thing for a smaller loan? Yes because of the good habit argument outlined above. Slow and steady wins the race. One day what you do with a small amount may be what you do with a large amount, so learn to do it correctly.

    Yes, I do coupons, Ebates, retailer rewards programs, credit card cash back, etc. Somebody noted in my original thread old habits are hard to break – I have no intention of breaking good habits. Each item may be small, but all of these habits have gotten my NW to 11x annual salary in my mid 40’s (average recommended by advisors is 4-5X). That took lots of little steps in everything I do, not one activity that had a massive reward, like the lottery or an inheritance – but it got me here nonetheless. This optimization also spills over to other areas. For other areas, lt gave me more money to invest in my business while keeping business costs lower, protecting margins and accelerating growth. Prudent saving and investing are interconnected, hard to do one well but not the other in my opinion.

    #224191 Reply
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 118
    Joined: 06/10/2019

    Going back to that $10K benefit on one emergency fund, finding the better rate once means I get the benefit year after year after year.

    Doctors are not used to residual income from a single action. If only an insurers paid us year after year for a one time effort.

    #224194 Reply
    Liked by snowcanyon
    Avatar snowcanyon 
    Participant
    Status: Physician
    Posts: 485
    Joined: 10/22/2018

    Does Wealthfront deduct their 0.25% fee from the high interest savings account?

    #224204 Reply
    Liked by Peds
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 2582
    Joined: 09/18/2018

    “finding the better rate once means I get the benefit year after year after year.”

    Incorrect. Your rate can be lowered and increased. As well as competitors change too. You can chase yield moving between instruments and institutions.

    Yes, you could guess right or wrong. Maximizing “better” is by no means a residual strategy for cash equivalents.
    Yes, you get a “better” yield from an S&P index fund. But that means you only give up the FDIC guarantee. Oops, some would argue that history shows that “residual “ is a whole lot better, 3 to 4 times. But that is a different asset class.

    #224216 Reply
    Liked by Peds, snowcanyon
    Avatar DCdoc 
    Participant
    Status: Physician
    Posts: 473
    Joined: 06/14/2016

    No .25% fee on the money account. I moved my EF there since I already had an investment account with them. I don’t have EMD level EF savings. No $10,000 for me. Maybe I’ll earn enough extra interest to buy an avacado toast, but all it took was 5 min to move the funds from my other EF location.

    #224219 Reply
    Avatar EntrepreneurMD 
    Participant
    Status: Physician
    Posts: 118
    Joined: 06/10/2019

    “finding the better rate once means I get the benefit year after year after year.”

    Incorrect. Your rate can be lowered and increased. As well as competitors change too. You can chase yield moving between instruments and institutions.

    Yes, you could guess right or wrong. Maximizing “better” is by no means a residual strategy for cash equivalents.
    Yes, you get a “better” yield from an S&P index fund. But that means you only give up the FDIC guarantee. Oops, some would argue that history shows that “residual “ is a whole lot better, 3 to 4 times. But that is a different asset class.

    Click to expand…

    I understand what you are saying, but I never said the rate wouldn’t change at CIT, just remain relatively competitive and they remained so after about 9 months with them. But the effort to open the account, transfer the funds the benefit I suspect I will continue to have one of the most competitive savings rates even if they fluctuate due to the gyrations in market rates, relative to competitors – and I transferred from a 0.1% rate so unless CIT drops to that banks rates, the benefits will continue year after year after year. I also mentioned Wealthfront’s rate is better. Those who go with Wealthfront are also likely to outperform over the years.

    I was focused on high yield savings accounts since that was the vehicle OP’s original question, I made no mention of index funds – they can lose value so not really a part of this discussion regarding emergency funds and OP’s request for safety. Yes of course other asset classes can provide better returns, but without the safety of FDIC insurance. My 3% APY 18 month CD is FDIC insured as well. I did not bring it up because we were talking about savings accounts.

    #224225 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 2582
    Joined: 09/18/2018

    “and I transferred from a 0.1% rate”
    That’s a bad habit to break. How long has that “residual “ been going on? So it’s not about the shopping of rates. You had $2mm parked with close to 2% opportunity cost.
    Hmmmm, just a poke. Bet a financial planner would have spotted that! Or a CPA, or your Dad.A second opinion helps. Ouch,

    #224240 Reply
    Liked by Peds

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