Is there ANY way to get a guaranteed 2%+ interest returned right now?

Republic Bank offers a 2% checking account.

H.

Pipeline MLPs are generally safe, and usually have good returns - if you’re willing to deal with the hassle of the extra tax forms you gotta fill out.

Did you see my link? It’s right before you said this.

Great link thanks. Those are some crazy rules though.

You could always move to Australia and get 5%+.

From the coments in that linked article looks like SmartyPig has 2.15APY, no fees, no minimums, & FDIC. Dunno if you want to put your money in a place called SmartyPig though.

Paying down your mortgage is mathematically identical to getting a guaranteed, totally safe return of 4.25%. Admittedly, it doesn’t give you free cash today – but it’s a wonderful safe investment.

The problem is it’s end-loaded in terms of increasing cash flow, and it seems like he wants something so that he can take the money out in a year and marvel at the extra he’s made. Not that there’s much marvelling to be done unless it’s a large chunk of change at the interest rates we’re seeing these days, but, y’know, he could buy a nice dinner once a year or something, maybe.

I understand the mortgage path. I was really just looking at a way to make my emergency fund grow. I need to keep that liquid (it’s an emergency fund), but was looking for a safe way to get some growth from it in the meantime.

One of the guys at work has been extolling the virtues of investing in the precious metals market. He’s also big on physical possession of precious metals (bars, maple leafs, etc).

The idea of buying silver in 100oz lots and having it shipped to your door had never occurred to me.

That’s the exact opposite of a guaranteed investment returning a steady income stream. Investing in precious metals is 100% pure speculation, and if you factor in storage and insurance cost their return is actually negative. You can make money on that sort of thing if you’re smart or lucky, but it’s not remotely suitable for an emergency fund.

One thing to consider - paying off your mortgage need not prevent an emergency fund. You could pay off your mortgage now and get a committed line of credit secured by your home equity. Your available line would be much bigger because you own all equity in your home. From a risk standpoint, it really would not be appreciably different than keeping the cash and having your mortgage in place. As you could draw the cash down from the home equity line in an emergency, it’s pretty much as good as having cash. The big advantage is that you are not paying interest just having the home equity line out there and available if you do not have an emergency and do not draw on it, while you are paying interest if you don’t pay down the mortgage and instead keep the cash actually on hand.

(Obviously you make your emergency fund “grow” through this strategy by taking the interest payments you are no longer making on having an outstanding mortgage and instead paying yourself that interest into some investing account.)

Not true. There were people who thought their line of credit was an emergency fund going into the last recession. Then the credit crisis happened and the bank unilaterally lowered their credit limit or cancelled the LOC outright. When you think about it, it’s kind of a catch-22. Most of the things that would cause you to dip into the emergency fund also make you a worse credit risk.

There is no substitute for cash on hand; nothing else is guaranteed to be there when you need it.

Most of those people did not have a fully owned home backing their line of credit. I’m not talking about still owing 80% of your home’s value in debt and getting a line of credit for the remaining 20%, I’m talking about having, for example, a $200,000 asset that you own in its entirety and asking for a committed line of credit for $60,000-$80,000 of it. There is no material “credit risk” for the bank under that circumstance, unless the line of credit you ask for uses up a large amount of the value of the collateral (which it probably shouldn’t, if all you are looking for is a six months of wages rainy day fund).

I actually have something comparable to this set up (as do several friends, some of whom lost their jobs). I did not (nor did they, to my knowledge) ever hear a peep out of the banks.

Yes, there is no technical substitute for cash on hand. But cash on hand does not generate a guaranteed 2%+ interest rate right now, which is what I think the thread starter is looking for.

Well, there are those bank accounts in the article I linked that do…

I forget how low people have their mortgages for these days. There is a good chance we will get inflation above that anyway, which would technically make it a risky investment.

VegasRobb: if you “hear one of the guys at work” talking about an investment, you’re already too late. Gold hasn’t reached its inflation-adjusted historical highs but it could crash just as easily since it’s up 400% this decade. I would only buy and possess physical gold coins if you are afraid of a capital crisis or mass inflation. Most people think we can muddle through without getting that far. Technically that would be an “emergency fund” but you’ll have to be secure enough in yourself not to feel like a kook. Also when nothing happens and gold crashes, you’ll need to be able to tell yourself that’s a good thing because the world economy is better. :)

I agree 100%. We keep our emergency fund in a money market account for this very reason. I don’t care how much/little it’s making - it’s not there to do anything other than keep abreast of inflation.

HELOCs and their ilk also carry the risk of the bank calling the loan and requiring it paid back in full at any time (many are set up like this, I believe). Sure, it doesn’t happen often but if it does, you’re fucked.

Not to mention that the interest rate on your HELOC can fluctuate, so when you actually do need to borrow from it you could end up paying significantly more than what your emergency fund money was “earning” by paying down the mortgage. And since the whole point of this scheme would be to eke out a couple more percent in interest, it wouldn’t take much for that to get wiped out.

I think it’s important to remember what the purpose of your emergency fund is. It’s not to make you rich, it’s not to help you retire sooner. It makes sense to shop for the best interest rate you can find, but not at expense of the primary purpose.

I guess it all comes down to risk tolerance. To me, an emergency fund is exactly that, an extremely unlikely to be tapped emergency fund. I’m not going to let $100,000 sit in an account making 1.5% while I’m paying interest on a home mortgage at 4% or 5% after taxes on the off-chance that some day I actually have to draw the emergency fund and discover that the interest rate may at that time be 7% or 8%.

I’ll take the guaranteed spread now, dump that money into an account, likely never have to draw on the emergency fund in the first place, and if I do have to draw on it, make up for the point spread with the cash I’ve put away from not paying a mortgage every month.

I’m also just frankly not sure if all of you have actually negotiated with a bank on a home equity line that is not heavily levered. I can lock at near prime and it is non-contingent/conditioned. Again, the situation is different if you actually own your home in full - you are then the one with leverage. A lot of the worries expressed here are ones that are applicable to lines that are secured by the last 20% of value, not lines that are secured by the first 20%.

I just hate to see people with large amounts of cash sitting idle for years, under the fear that they may some day need an emergency fund. I’m not suggesting that you put your cash in junk bonds, but there are safer alternatives that are not quite as poor a producer as money markets.

Again, the point is not to make money - it’s to have cash on hand and readily available. And $100,000 is way too much for most people as an emergency fund. 3-6 months of expenses is plenty.

Your emergency fund earns peace of mind. It doesn’t need to make money.