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Investing Mistake #2: Leaving cash in zero-yield T-bills or money market funds when numerous FDIC-insured online banks are paying significantly more.
Cash is your best shelter in a market storm — even
better than gold, because the price of
bullion can fluctuate wildly and unpredictably. Investors of all ages, including retirees, should set aside a portion of their
income to build a cash kitty. I suggest keeping at least six months’ worth of living expenses in cash at all times; three years’
worth if you’re retired.In today’s unsettled environment, I prefer to squirrel the majority of my cash in a place where people always used to stash
cash
— the bank. Banks are still failing, even though it appears the worst of the financial crisis is behind us, so be sure you
open accounts that are FDIC insured. I recommend opening as many bank accounts as you need to stay within the boundaries of FDIC
insurance: $250,000 per depositor ($500,000 for joint accounts).GMAC Bank has long been one of my favorites. It is now called Ally Bank and is paying 2% in its online savings account.
That’s hardly a bonanza by the standards of the 1980s or 1990s, but it’s several times more than what the U.S. Treasury is paying
on one-year bills!
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