Where to put our reserves

Started by CoreyA • 5 replies • 1394 views

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CoreyA (Illinois)
Posts: 13

Posted:

I am part of a small association and we have about $40,000 in our reserves. Where is the best place to put this so we can get some interest income, but ave easy access to it in case we need to use it. I anticipate needing to use it within the next year to make some improvements.

Thank you

DavidW5 (North Carolina)
Posts: 565

Posted:

There are a number of banks offering FDIC insured money market accounts with interest in the 1.0 to 1.1%. Do a google seach for best money market rates.

MarkM19 (Texas)
Posts: 65

Posted:

Dave,
We had a large amount of liquid money $477K not in CDs in our Reserve account. We also have an additional $450K in CDs. Our management company should have advised us to move a large portion of those funds into CDs even at the low rates that are currently available.

Our Morgan Stanley / Smith Barney rep just told us that Business Money Market accounts are not FDIC insured. I personally think that this was just a line to get us to let her invest the $477K in CDs. I do not think that this is not the right thing to do with the money my question is was our money at risk by not being FDIC insured?

Mark

DavidW5 (North Carolina)
Posts: 565

Posted:

Quote:

Posted By MarkM19 on 08/25/2011 4:16 PM
Dave,
We had a large amount of liquid money $477K not in CDs in our Reserve account. We also have an additional $450K in CDs. Our management company should have advised us to move a large portion of those funds into CDs even at the low rates that are currently available.

Our Morgan Stanley / Smith Barney rep just told us that Business Money Market accounts are not FDIC insured. I personally think that this was just a line to get us to let her invest the $477K in CDs. I do not think that this is not the right thing to do with the money my question is was our money at risk by not being FDIC insured?

Mark

Our operating account (a checking account at CAB) at times exceeds the $250,000 FDIC insurance limit. When we realized that this was an interest bearing account (earning .25%) we directed the management company to convert it to a non-interest bearing account. Such an account carries unlimited FDIC insurance. We felt the small loss of interest was worth having unlimited insurance.

We also tried a Morgan Stanley account but the CD rates they offer are pathetically low so we place our CD's ourselves.

Bank Money Market accounts, whether personal or commercial are FDIC insured up to $250,000. Either you misunderstood or your MS rep is confused. Mutual fund money market funds, however, are not FDIC insured.

There is probably very little risk of loss even if an account exceeds the FDIC limit. What is the chance that the particular financial institution holding your funds would fail at the time your funds were over the limit? On the other hand, you are probably not fulfilling your fiduciary duty if you allow funds to remain uninsured for an extended period of time.

SusanW1 (Michigan)
Posts: 5,202

Posted:

For $40,000 that is going to be used within the next year, I'd put it into an interest bearing checking account.

I personally don't like to see more than $100,000 with any one institution.

DavidW5 (North Carolina)
Posts: 565

Posted:

Quote:

Posted By SusanW1 on 08/26/2011 4:56 AM
For $40,000 that is going to be used within the next year, I'd put it into an interest bearing checking account.

I personally don't like to see more than $100,000 with any one institution.

With the FDIC insurance limit at $250,000 until 2013, why would you restrict funds to $100,000?

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