Rising yields on cash deserve your interest
Most Americans have become accustomed to earning next to nothing on their cash. Like pedestrians staring at smartphones, it’s an unfortunate reality that we reluctantly accept.
Low-yielding cash is a result of monetary stimulus and economic policies forged a decade ago during the Great Recession. The ability to borrow money cheaply is good for economic growth and helped clear a path for what became one of the longest economic expansions in history.
The side effect? Dollars held in checking, savings, and money market accounts would have earned almost as much sandwiched between your couch cushions.
But times have changed. Slow-but-steady rate hikes by the Federal Reserve and a strong U.S. economy helped boost the 10-year US Treasury yield up to 3.25 percent in October before falling in the months since. We have also seen a flattening of the yield curve, which means short-term assets like cash are relatively more attractive.
Several companies now offer online savings accounts with interest rates in the neighborhood of 2 percent per year. If you reside in a higher tax bracket, you can find money market funds that pay roughly 1.4 percent per year federal tax-free. Some of these options are FDIC insured. Some are not. It’s important to check the details before investing.
If you don’t know how much your cash is yielding, it’s time to call your bank or investment adviser. Generally speaking, the larger the institution, the less likely it is your existing interest rate will be the most competitive. In many cases, there’s probably a higher-yielding alternative.
All that said, even though a 2 percent yield could be eight to 10 times what you have been getting in recent years, it’s still not an attractive long-term return. For investment purposes, cash should still be viewed as a holding tank.
Higher volatility in the stock market since September and better yields make cash more appealing, but it’s still not a suitable replacement for growth assets like equities. Warren Buffett reminds us that when you consider inflation, cash remains a poor long-term investment.
“People who hold cash equivalents feel comfortable,” Buffett said. “They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.”
With a little due diligence, you can now get “something” instead of “virtually nothing” on your cash holdings.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Authors
Ben Marks & Brett Angel
You may also like
U.S. stock market hardens after economic volatility, but some threats remain
How far the stock market has come without traveling very far is remarkable. As we near the midway point of 2025, the major U.S. equity benchmarks sit less than 2% from where they began on January 1…
Now is the time to invest in bonds, with yields too good to ignore
Recently, I did something in my investment portfolio that I had never done before: I bought bonds.
Trump tariffs created a volatile market, which comes with big opportunities
Maybe now investors will realize how good we had it in 2023 and 2024. Those back-to-back years of 20%-plus returns and minimal volatility suddenly feel like a distant memory.