In 2023, investors experienced higher yields, but the possibility of interest rate cuts in 2024 is causing uncertainty. Although Federal Reserve officials foresee three quarter-percentage-point cuts, the timing and implementation of these changes remain unclear. As a result, savers need to explore various options for their cash in order to align with their goals and timelines. This article will discuss the top choices for cash in 2024, provided by financial experts such as Ken Tumin, founder and editor of DepositAccounts, among others.

One strategy to consider is investing in a certificate of deposit (CD) as interest rates fluctuate. CDs offer a predetermined interest rate for a specific period, usually earning higher returns compared to savings accounts. However, withdrawing funds before the CD matures usually results in penalties. As of January 4th, one-year CDs had an average rate above 5.5%, according to DepositAccounts. Nevertheless, Tumin anticipates that CD rates will decline closer to the projected rate cut. It’s essential to carefully review the terms and conditions, as penalties for early withdrawal can vary. Those who may require access to their funds sooner should explore penalty-free CDs, which may yield lower interest rates but offer flexibility without penalties. Depending on the individual’s bank, a penalty-free CD may have a higher interest rate than a savings account.

Whether saving for short-term or long-term goals, Treasury bills (T-bills) present a viable option for cash investment in 2024. Patrick Lach, a certified financial planner and founder of Lach Financial, recommends T-bills as a safe haven for cash. These government-backed securities offer terms ranging from one month to one year and can be purchased through TreasuryDirect or a brokerage account. Additionally, T-bill interest is not subject to state or local taxes. As of January 4th, 1-month and 2-month T-bills were generating yields around 5.4%. Lach provides an example of how the after-tax yield for individuals in the 13% tax bracket in California would be equivalent to a CD earning 6.21%. However, it’s important to note that T-bills purchased via TreasuryDirect have less liquidity compared to cash in a savings account or a penalty-free CD. If an investor wishes to sell T-bills before maturity, they must keep the asset in TreasuryDirect for at least 45 days before transferring it to a brokerage account.

Financial experts like CFP Seth Mullikin advocate for money market mutual funds as an attractive option for cash allocation. Different from money market deposit accounts, money market mutual funds are mutual funds that typically invest in shorter-term, lower-credit-risk debt instruments like Treasury bills. Although money market funds are relatively low risk, they do not offer protection from the Federal Deposit Insurance Corporation. As of January 4th, some of the largest money market funds were paying approximately 5.5% returns, as per Crane Data.

As investors brace for potential interest rate cuts in 2024, it is essential to evaluate various options for cash allocation. CDs, penalty-free CDs, T-bills, and money market mutual funds are among the top choices recommended by financial experts. Each option has its own advantages and considerations, depending on an individual’s goals and timeline. By carefully considering these alternatives, savers can navigate the uncertainty of interest rate changes and optimize their cash investments in 2024.

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