We're getting ready to start a significant home remodel that will approximately double the size of our house and cost about $1.3m. The GC we're using invoices biweekly once things get underway, in order to cover his costs and pay his people. We'll separately be responsible for purchasing appliances, lighting, etc.
The project will start this fall and take about a year (his estimate was 10mo and we're assuming 14mo). If we're selling some investments to raise cash to pay for this, in order to avoid incurring any new debt, where is the best place to park $250-500k at a time for easy access over the course of a ~6mo period?
Initial thoughts: HYSA or MM are the obvious options, but are they the only ones, and if not, what else? If so, what are some banks I should consider for high yield and easy access?
Best place to park cash that will be used to pay for home construction over the next 12 months
byu/lilelliot inpersonalfinance
Posted by lilelliot
5 Comments
I would just do HYSA or MM. Our mortgage is through Huntington and they’re currently offering a MM savings with a rate of 4.59% due to the preexisting relationship with them. Maybe you can swing something like that.
You could look at Treasury bills for a tiny bit more yield, and less taxes if your state has income tax.
Short term T-bills right now are 4.3xx% versus the ~4% paid by MMF/HYSA.
Depends how much you want to work for a few extra grand in yield.
HYSA, MM, CD, T-bill. Honestly all are very similar. A CD gives you a bit higher rate in exchange for (usually) a penalty if you withdraw early. A T-bill can be somewhat volatile during the duration of the bill, but the value at expiry is guaranteed and the interest is exempt from state taxes. You could get a little fancy and put like 1/3 in a HYSA, 1/3 in a 6-month CD, 1/3 in a 12-month T-bill, so you keep some for immediate access. Or if you have a lot of time on your hands, you could probably get like $1-2k in sign-up bonuses if you open several HYSAs.
But to emphasize, all of this gives you no more than a 1% better return then what you’d get from Googling “best HYSA” (they are all very similar) and just going with that.
HYSA or MM are going to be your best options. A CD might earn a better interest rate, but that won’t mean anything if you’re having to pull from it all the time.
If you want to optimize, look around for the best HYSA options available to you. If there is a portion of the money that you know you won’t need for six or seven months, you might decide to put that amount into a CD.
Ultimately, an interest rate difference of a half a percent or so will not have a huge impact on that amount over 12 months. You’re better off using a HYSA, or a high-interest checking account if you plan to make lots of separate purchases. I’ve seen some high-interest checking accounts as high as 4%.
No need to over think this. HYSA or MM are the only way to go at whatever bank you prefer.