Making Cash Investments

When people think of investing, things like savings accounts, certificates of deposits and money market checking accounts don't generally come to mind. But the fact of the matter is that these are investments -- cash investments. The things listed above are all investments because the money you put into them earn a return. It may not be a high return, but it is a return nonetheless.

Making cash investments is one way that you can build an emergency fund with accessible and liquid assets. Consider: cash investments are relatively safe. Even though there is a possibility that they will lose value, the chances of that happening are fairly slim. And, if you put your money in the right places, it is insured against loss due to such things as your bank folding.

High yield savings accounts

I personally like the high yield savings accounts. These are cash investments that give you a higher rate of return than a traditional savings account. Normally you have to sign up for an online account in order to take advantage of these types of accounts. And you do usually have a waiting period before funds you deposit become available, but that usually isn't a problem.

Certificates of deposit

These can be great if you want to do a little laddering to help your emergency income grow. Unfortunately, these are not as liquid as a savings account. But they are also great for helping you save for medium term goals. And it can be a comfort to know that the money will be available in a few months if you need it.

Money checking market account

These types of cash investments are interest bearing checking accounts. They earn a return at the cash market rate. They do usually require rather large minimums, though. Check to make sure that you aren't going to fall victims to fees for writing more checks than what you are allowed as well.

Returns on cash investments

It is important to realize that the returns on cash investments are not very big. And, with the recent Fed rate cuts, they are getting smaller. Indeed, right now, it is rare to find a cash investment that will allow you to beat inflation. This means that you should be very careful about how much you commit to cash investments. They are great for building an emergency stash, and for adding some stability to your investment portfolio, but I wouldn't stake your retirement on cash investments.

Disclaimer: I am not an investment professional. This should not be construed as investment advice. All investment carries the risk of loss. Before investing, do your own research and/or consult with an investment professional.