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A smarter way to stash your cash
Our objectives are aligned with yours: we want to grow your money, so we created Cash Reserve ...
A smarter way to stash your cash Our objectives are aligned with yours: we want to grow your money, so we created Cash Reserve for you. The takeaway: Cash Reserve is our high-yield cash account offering FDIC insurance at our program banks (up to $250,000 of coverage for each insurable capacity—e.g., individual or joint—at up to eight Program Banks). It’s different from the savings accounts that you might find at traditional banks. We’re not tied to one specific bank. We use our size and scale to access a network of program banks. By spreading customer deposits across multiple program banks, it allows us to provide you with attractive rates and higher FDIC insurance than the average savings account.* Funds deposited into Cash Reserve are eligible for FDIC insurance once the funds reach one or more program banks. If clients elect to exclude one or more Program Banks from receiving deposits the amount of FDIC insurance available through Cash Reserve may be lower. Our high-yield Cash Reserve account offers a competitive APY rate, allowing you to secure and grow your money during volatile times. Here’s how variable rates work: The rate is variable, meaning it will change with the prevailing interest rate environment. The amount banks are willing to pay on deposits is heavily influenced by the Federal Reserve, which sets the rate at which banks can loan money to each other. This is known as the Federal Funds Rate. If the Federal Reserve increases or lowers its target range, the interest rate on Cash Reserve will generally change by a similar amount. You can expect this to impact rates at other banks as well. You can feel confident that Betterment is always working to offer you competitive interest rates, no matter what the current rate environment may be. Our Cash Reserve account offers FDIC insurance up to $2 million ($4 million for joint accounts) with our program banks. That’s 8X the standard FDIC insurance.* Here’s how FDIC insurance works: By spreading customer deposits across multiple program banks (as opposed to keeping everyone’s money at one institution), we’re able to stack the standard $250,000 of FDIC insurance per institution. We originally used this approach to offer up to $1M ($2M in joint accounts) in FDIC insurance for money saved in Cash Reserve. But after the news about Silicon Valley Bank, we set to work to double the coverage amount of FDIC insurance through our program banks. Plus, we don’t charge fees on your Cash Reserve account: Betterment LLC only receives compensation from our program banks. Betterment LLC and Betterment Securities do not charge fees on your Cash Reserve balance. Why it matters: Similar to how our approach to investing is grounded in diversifying assets, Cash Reserve diversifies savings across multiple institutions. In addition to a competitive variable rate and above-average* FDIC insurance, this approach could help mitigate loss and risk in the unlikely scenario that one of our program banks fails. You can’t eliminate risk, but you can help reduce it by using technology and creative thinking. -
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How much cash is too much cash to be in savings?
Cash is great. But can you have too much? And what should you do with it? Let’s find out.
How much cash is too much cash to be in savings? Cash is great. But can you have too much? And what should you do with it? Let’s find out. The main point: If you have too much cash in savings, you may be missing out on growth from stock or bond investments. Consider having cash in savings for short-term needs and putting the rest into investing accounts. Facts about cash in savings: Cash in savings is liquid, meaning it is easy to access when you need to withdraw it for spending. Cash in savings is also low risk, meaning your money should not decrease in value like stocks if you stay within FDIC insurance limits. But—cash in savings does not have the opportunity to grow compared to cash in stocks and bonds, especially when savings rates are not keeping up with inflation. Finding a balance: To strike the right balance between cash and investments, consider the following: Cash is a secure option for your emergency fund. Most experts recommend having three to six months of living expenses saved. Cash is the lowest-risk option but you can use a mix of bonds and stock too. Take a close look at your situation and save what feels right for you. After that, take a look at your extra cash. Cash and investments can also be right for your short-term goals. Having cash in savings can be wise for short-term goals (we consider anything under 12 months short-term). But depending on how you’re defining short-term and your risk tolerance, you may consider putting some cash for shorter-term goals in bonds and stocks. Investments can support your long-term goals. For most goals longer than 12 months, consider putting your cash into stock and bond investments. While investing involves more risk, stocks have had greater long-term gains historically than leaving your cash in savings. We have options for you: Open a Cash Reserve account if you’re looking for a secure way to save. It’s a high-yield cash account that helps grow your savings while offering FDIC insurance† up to $2 million ($4 million for joint accounts) through our program banks (up to $250,000 of coverage for each insurable capacity—e.g., individual or joint—at up to eight Program Banks). Open an investing account for your long-term goals. We’ll help assess your risk tolerance, provide investment recommendations, and make it easy to access expert-built portfolios to get you closer to your goals. -
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When will interest rates finally start to fall?
We look back at the last 40 years of interest rate peaks and plateaus for a guide.
When will interest rates finally start to fall? We look back at the last 40 years of interest rate peaks and plateaus for a guide. This decade of investing has come to be defined by one thing: interest rates. The federal funds rate has sat north of 5% for more than a year now, a level neither seen nor sustained since the runup to the Great Recession. Which has everyone from bond traders to homebuyers asking the same question: When will rates finally start to fall? Optimism that the Federal Reserve would cut rates throughout 2024 was widespread to begin the year, but inflation’s small uptick to start the year has thrown cold water on those expectations. So how far in the future could the first cut be? No one knows the exact answer, but history offers several reference points. Rate peaks are common, plateaus less so When you take a look at the past 40 years, the cyclical nature of short-term rates stands out: The economy heats up, the Fed raises rates. The economy cools down, the Fed lowers rates. Rinse and repeat. Historically-speaking, however, it’s usually only a matter of months until rates drop after peaking, which means our current cycle is starting to look more like a plateau by comparison. It’s already lasted longer than all but one other cycle since the 1980s. Rate peaks have lasted 8 months on average since the late 80s This holding pattern isn’t without reason, of course. Inflation has slowed considerably since 2022, but it’s been stuck in its own holding pattern as of late, hovering more than a full percentage point over the Fed’s stated target of 2%. On the flip side, supply and demand appear better balanced, so if inflation resumes its slowdown in the coming months, then signs point to possible rate cuts late in the year. So what’s a saver to do? Consider deploying excess dollars Whenever the federal funds rate falls, other interest rates follow, including variable interest rates on high-yield cash accounts. Stocks and bonds, on the other hand, tend to benefit from rate cuts. Because of this, we suggest taking another look at your cash situation. If you’ve been stockpiling cash above and beyond an emergency fund and other major purchases, it may be the time to start investing some of that excess in the coming months. Feeling anxious about diving into the market right now? Our all-bonds BlackRock Target Income portfolio offers the potential for higher yields than cash in exchange for taking on some risk. If or when a long-term goal comes to mind for those funds, consider switching to a diversified portfolio of stocks and bonds. And keep in mind you don’t have to move all your money at once. With a few clicks, you can set up a recurring internal transfer to slowly but steadily dollar-cost average your way from cash to investing.
Considering a major transfer? Get one-on-one help with one of our experts. Explore our licensed concierge
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