Look For Best Parking Places For Cash

Rates And Terms Vary

Ask if your brokerage has something better; compare rates online

Cash is where you stash your dough right before putting it to work in stocks or mutual funds. That's during a growing market.

Cash can also be a parking space. When the market is clawing stocks like an angry grizzly, you can pull your money out. Both you and your dollars can rest on the sideline.

Even in a good market, cash can be a safe haven. It's where you can protect your principal if you have a big expenditure coming up within a year, maybe two.

So whether the market is up or down, cash can be a vital tool.

But not all cash is alike. Depending on the type of account, your balance can earn different rates of interest. Your access can also vary.

So it's important to understand differences among accounts that may seem similar or even the same.

Look at what's available at your brokerage. Many offer a variety of cash accounts.Check their Web sites to see how much they pay on balances.

Not Insured

These types of money funds are not insured by the FDIC. Money market mutual funds are portfloios of short-term investments such as commerical paper and Treasury securities. The SEC requires these funds to have average maturities less than 90 days.

But if you get a money fund through a bank, typically called a money market account, the the FDIC will insure it up to $250,000. (Through Dec. 31, 2013. As things stand now, the standard insurance coverage will revert to $100,000 per depositor Jan. 1, 2014.) By law, money market accounts can only offer limited check writing.

Financial firms don't always point out their higher-paying cash accounts. So always ask if your firm offers more than one type. Learn about their differences.

Certificates of deposit are yet another way to let cash earn interest. These tie up your money for a set period. Early withdrawals typically trigger penalty fees.

Many CDs require you to start with at least a $1,000 deposit.Banks use the funds to make loans.

When should you invest in a CD rather than a money fund? Generally, if you think interest rates are going to fall and you want to lock in a current rate. Also, if you don't mind tying up your money.

By investing a little time online, you can compare minimum deposit rules, maturities and yields. Make a list. Or start a spreadsheet.

Banks post their own rates and other specifics. Sites like Bankrate.com group various types of accounts together to make conmparison shopping easier. Such sites also post lists with links to banks.

For an example, on Bankrate's site you'll find Aurora Bank's one-year CD, at 1.60%, with a $1,000 minimum balance, as of Feb. 22. You can use a link to go to Aurora's own site to learn more details.

You can scout for money market accounts too.

For example, Bankrate.com shows that Capital One Direct Banking, based in Glen Allen, VA, was offering a money market account whose starting yield was 1.44% on a $2,500 minimum balance.

Remember, money fund yields can change over time. CD yields are fixed at the outset.

Overall, the Web makes it easy to compare accounts offered by brokerages and banks.

Shop Around

One thing's for sure: There's a lot of variety, especially on yields. There's a real incentive to shop around. A lot of banks are willing to pay much higher returns than others to attract your money.$

Ray Buckner (Chicago, Illinois) provides personal financial planning and wealth management services for professionals in the greater Chicago metropolitan area. His primary focus is serving pre-retirees who are preparing for a successful retirement as well as those who have already retired and want to develop a 100% retirement income personal paycheck. His pre-retiree clients want to focus on replacing 100% of their last year's income and keep their current standard of living through out their retirement adjusted each year for inflation.

www.promoneyreports.com/rbuckner
www.primerica.com/rbuckner