This blog serves as a possible costless solution for those that have a surplus of idle cash.

When COVID-19 arrived in 2020, the Federal Reserve began cutting interest rates to make money easier to borrow. That cycle was double-edged: It made borrowing cheap, but any asset that was tied to interest rates paid the investor less.

Fast forward to 2022 – The Federal Reserve has increased rates at a historic pace with the intention of restricting borrowing and slowing down inflation. Now, the 2-Year Treasury Bond pays 2.72% November 2022 vs. 0.14% in November 2020. This means that people with short-term interest can now EARN interest on their cash alternative investments…

PROBLEM: Investors have too much cash in checking & savings accounts earning nearly 0% (and that’s taxable!) The below chart shows M1 money supply, which measures the most liquid assets in the U.S. money supply in Billions of dollars over a 5-year period. You can guess what the spike surrounded (cough, cough - it starts with co and ends with vid). There is literally 5x as much cash as there was before 2020…


SOLUTIONS: There are many alternatives to manage idle cash than leaving it in your bank account. I’ve listed a few below for reference, in order of liquidity or ability to access the cash quickly if needed:

  1.  Money Market Accounts
    • These are savings accounts with higher interest rates.
    • Bank rates vary significantly, but many are now in the 1.00% interest rate range at the high end.
  2. Money Market Mutual Funds
    • Outside of holding cash, this is the most liquid cash alternative. Most options are daily liquid, which means they can be sold and available as cash in as little as 24 hours. These rates float daily with changes in interest rates, so as rates move higher or lower, so will the yields below. The only cost is 0.20% of expense ratio to the mutual fund company, none to JMG in retail accounts.
    • 3.81%: The current daily net yield on the taxable money market fund that we prefer.
    • 1.87%: The current daily net yield on the tax-free money market fund that we prefer.
  3. Certificate of Deposit (CD’s)
    • Certificates of Deposit are illiquid for a period of time, in most cases approximately 1-Year. For this liquidity, CD’s promote higher savings rates than idle cash in bank
      accounts. These are FDIC insured up to $250,000.
    • 1.05%: The current average rate of a 1-Year CD (
    • 1.16%: The current average rate of a 1-Year Jumbo CD (
  4.  Treasury Bills/Bonds
    • 4.15%: 3-Month Treasury (Annualized)
    • 4.58%: 1-Year Treasury (Annualized)
    • 4.37%: 2-Year Treasury (Annualized)

THE BOTTOM LINE: We are fiduciaries and always put our client’s best interest above all else. Our solution for individuals that have excess cash is to hold that cash in a money market fund that currently pays much more than the bank and to do it at no cost to the client. It’s a better mousetrap in our opinion and can help generate more cash flow.

Small changes now can make a big impact long-term. There are opportunities available now that haven’t been available years. If you have questions on how these options would work best for you, please reach out to our office.

*Rates as of close of business 11/15/2022

Any opinions are those of author and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. An investment in a money market fund is neither insured nor guaranteed by the FDIC or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investors should consider the investment objective, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other important information, is available from your Financial Advisor and should be read carefully before investing.

CD rates are subject to change and availability. Minimum quantity may apply. Please contact your financial advisor for complete information about CDs, including charges and expenses. U.S. government bonds and Treasury bills are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government. Charts/graphs are for illustrative purpose and not intended to reflect the actual performance of any particular security.