Do people typically keep some portion of their savings or emergency fund in a Fidelity brokerage account to earn interest?
I’m not too concerned about fluctuating interest rates as long as the cash is earning something. I’d prefer not to open a separate high-yield savings account since I already have a Fidelity individual brokerage account. What are the advantages and disadvantages of keeping idle cash in this account instead?
Uninvested cash in Fidelity brokerage : Pros and cons?
byu/Rachael__E ininvesting
Posted by Rachael__E
6 Comments
My wife does this with her vanguard account since all uninvested cash there is automatically placed in vfmxx, their money market fund. It’s a nice feature
Edit: she basically uses it as her savings account
I switched from a HYSA to keeping most idle cash at Fidelity caz it seems the difference in rates was not big enough to justify another account…….So far it’s been much more convenient and I haven’t really noticed any downside tbh…
I use it as my personal savings account. The only thing I don’t like is the lack of Zelle, but I use another bank for that.
Yeah, this is what I do.
Disadvantage of idle cash in general is that it loses real value over time; *maybe* the interest you earn gets you back to zero, maybe not. But if this is truly $$ dedicated towards liquidity and emergency fund, then it’s a good place to park it.
Beyond that I think it’s a great move.
Are you just asking if the Fidelity brokerage’s default money market account (the place where the money goes when you add money to your account) will earn interest? Because yes, it does. I think the rate right now is about 3-4%. So it’s competitive with a HYSA, although there are probably better HYSA options out there if you shop around.
But if you’re going to park cash to beat inflation, it kinda feels like a waste not to park it in the 500 or the total market index fund, since the returns are typically closer to 10%, and even if they’re only 5%, that’s more than you’ll get from the money market account.
I guess it depends how soon you need the money or if you just want some liquid cash sitting in an account, earning enough interest to offset inflation.
The main downside I see of keeping idle cash in the Fidelity money market fund is you’re earning a lot less off it than putting it in a fund. If you don’t care then go nuts. But the way I figure it, 3-4% probably is only barely beating inflation, if at all. You’re letting them hold your money and you’re not getting much or anything back. You just… Aren’t losing value.
I do (in SPAXX). There are HYSAs that can give you a somewhat higher interest rate, but since I’m already doing business with Fidelity, it makes my life easy and keeps my money easily available.