When we started MaxMyInterest seven years ago, in the wake of the financial crisis, the premise was simple: how can we help individual investors keep their cash safer while earning more at the same time?

The safe part was easy — hold your cash directly, in your own name, in your own bank accounts, but spread it across multiple banks, so that you can obtain more FDIC insurance coverage. By avoiding brokered deposit systems or other gimmicks that promise high yield through obscure structures, you’d always know exactly where your cash was since it was always in your own bank accounts that you could access same-day if needed.

The ability to earn more was also pretty straightforward. It was 2013, and e-commerce was growing rapidly. It had become obvious to most that you could buy a book online for less than the in-store price because you weren’t paying for the costs of operating the store. A book is a commodity, and absent the costs of rent, air conditioning, etc., online stores could sell the book at a lower price and still earn the same profit, if not more.

Putting these two concepts together led to the creation of MaxMyInterest: a platform that would help you keep cash safer while earning more by leveraging the efficiencies of online banks. But we noticed one additional, often-overlooked factor: unlike a book that you purchase once, with a bank account, you’re really making a purchasing decision every single day. Because interest rates change, you don’t want to choose the highest yielding bank today, you want the highest-yielding bank every day.

So we took Max one step further: rather than try to pick banks at a single point in time, we made it easy to open multiple bank accounts at once. Max’s software then automatically helps you route your cash to whichever of your banks is willing to pay you the highest yield each month.

Along the way, we discovered yet another inefficiency in the market. Historically, banks have had to pay to acquire their customers. Even without branches, online banks still spend a fortune on advertising and click-through referral fees. The result: every dollar that banks spend on customer acquisition is a dollar less that they could pay you in interest.

As the Max platform grew, we found we were able to leverage the scale of our business to drive even more scale, arranging preferential rates and terms for our customers — rates that could only be found on the MaxMyInterest platform. Since Max doesn’t accept advertising, referral fees, or payments per deposit, banks are able to attract high-quality customers at lower cost. In turn, they can then afford to pay higher yields to Max customers. It’s a virtuous cycle that gets better as more and more customers discover Max.

As Max has grown, we’ve invested in making it even easier to open new bank accounts, so that as we add new banks to the platform, Max customers can open new accounts in as little as 20 seconds. No logins, passwords, or trial deposits; just a few clicks followed by near-instant approval.

Amidst the COVID-19 pandemic, where much uncertainty remains and interest rates are ultra-low, earning as much as possible on your cash while keeping it safe and liquid is as important as ever.

(Originally published on ValueWalk April 28, 2020)

Mark Twain is reputed to have said that “history does not repeat itself, but it rhymes.” The events of the past few months have certainly conjured up many memories of the Financial Crisis, and for those following bank stocks, the emotional roller coaster of 2008-2009 feels all-too-present today. The fate of many of our nation’s banks may rest largely on how long our economic paralysis is sustained in support of the greater good of public health.

Bankers and research analysts agree that American banks are much better-capitalized than they were a dozen years ago and should be able to withstand several months of severe economic contraction. But if the economy were to remain largely shut for six months, absent a windfall of additional money-printing from the Fed, another financial crisis could ensue atop our existing humanitarian crisis.

With all this doom and gloom, there is a glimmer of hope. Like every other financial or humanitarian catastrophe to befall our modern age – World War I, The Great Depression, World War II, Black Monday, the collapse of Long Term Capital Management, the Dot-com bust, 9/11, and the most recent Financial Crisis  – the path downwards has been followed by an even more ebullient path upwards. The shape, timeline, and certainly of any future recovery is unknowable, but we can hold out hope that it will at least rhyme with the events of the past.

I’ve had the experience of living and working through several market dislocations. From each one, I’ve sought to learn how to extrapolate from relevant data and facts, and, perhaps more importantly, how to recognize and curtail emotions. While every investment brochure disclaims that “past performance is not indicative of future results,” as an investor, it’s important to learn from your own past performance and journal your mistakes. Only by dissecting your thought processes at the time – both rational and emotional – can you endeavor to make better decisions the next time you are faced with a similar set of facts and circumstances.

Online Banks: The Financial Crisis As Inspiration

I was stationed in Tokyo during the Financial Crisis, working as an investment banker for one of the largest American banks, which had recently acquired one of Japan’s largest brokerage firms. I arrived in August 2007, just after closing the last private equity-based capital raise that involved so-called “Toggle Notes,” where a borrower could elect whether to pay the interest it owed in cash or in-kind (i.e. more debt.) It was illustrative of just how favorable the capital markets had become for issuers – a sign of a raging bull market where seemingly nothing could go wrong.

As an analyst on Wall Street in the late 90s, I learned that the hallmark of the late stage of a bull market is when the market “climbs a wall of worry.” In other words, in spite of each piece of bad news that could befall the economy, stock market indices continue to march upwards. In addition to overly accommodating capital markets, several other more pedestrian warning signs were also present by the summer of 2007. The drivers who shuttled me home from the office late at night were increasingly talking about their stock market gains and the houses they were flipping for profit. In-flight magazines contained countless ads for hi-rise luxury condominium developments. Were these signs of a healthy economy where the rising tide lifts all boats, or a warning that the pace of wealth creation was unsustainable?

As 2007 progressed into 2008, the unsustainability of the bubble in asset prices became all-too-apparent, and banks began to fail. From 2008 through 2012, the FDIC closed a staggering 465 banks. To put this in context, in the five years prior to 2008, only ten banks had failed. The bank where I worked didn’t fare much better. Bearing witness, first-hand, to such a precipitous fall from grace taught me an important lesson in the fragility of banks. No matter how storied the name or how solid the marble that adorns its branch entrances, banks exist at the pleasure of investors and depositors’ willingness to extend credit in exchange for levered returns.

The Importance Of Keeping Cash Safe

In response to the Great Depression, President Roosevelt and Congress enacted the Banking Act of 1933, paving the way for the creation of the Federal Deposit Insurance Corporation (FDIC). When my bank’s share price hit $0.97 in March of 2009, it struck me that much of my cash held at that bank might be in peril. While the FDIC provides deposit insurance, that coverage is limited, and every dollar that you hold above the FDIC insurance cap makes you, in effect, an unsecured creditor of that bank. I realized that in order to keep cash safe, I needed a better solution.

I began researching options for cash. Many banks and brokerage firms offered brokered deposit solutions, where a bank takes your excess deposits and sells them to other banks. The pitch is that this helps you obtain increased FDIC coverage, and so you should feel safe keeping all of your funds at your home bank or brokerage account. But my research revealed several risks inherent in this system, as well as large conflicts of interest. If I was to ensure all my cash was safe and liquid, I needed a better solution.

The best thing I could think of was to open new bank accounts at multiple banks and diversify my holdings by spreading my cash across them. I’d hold each account in my own name, control how much was kept at each bank (to ensure all funds remained below the FDIC limit at each bank), and retain full same-day liquidity at each bank. Unlike brokered deposits, where you might not be fully insured if the broker sells your deposits to a bank where you already hold accounts, and where you could lose access to all your funds if your main bank goes under, with my strategy, I knew that I’d maintain full control, full liquidity, and full FDIC-insurance coverage.

Online Banks And Interest Rates

In 2009, online banking was still relatively nascent, but, it turned out, opening new accounts at online banks was much faster and easier than going into a bank branch. I opened accounts at several of the leading online banks, which also happened to offer higher interest rates than their brick-and-mortar peers, owing to their lower operating cost structure. Much like Amazon had figured out how to sell a textbook cheaper by eschewing physical stores, online banks applied this concept to banking, making it possible to earn a higher interest rate on FDIC-insured savings accounts.

Still, the online banks changed their rates with great frequency, and often when I logged in to check my balances, I found that interest rates had changed. It occurred to me that I could move funds from one bank to another to benefit from yet-higher interest rates. For the next three-and-a-half years, I found myself logging in each month, checking rates, and manually moving funds from bank to bank to obtain the highest yield while keeping all my funds FDIC-insured.

This strategy could be highly lucrative (effectively capturing a pure arbitrage in the market for bank deposits) but also a huge time sink. There had to be a better way. How could I automate this process, so that my money could continue to earn the highest yields possible without my having to lift a finger? And if I could find a way to automate the management of my own cash, why couldn’t I open up this same strategy to anyone else who wanted to simultaneously earn higher yields with less risk?

Online Banks: Conclusion

The result: I created my own automated cash management platform – MaxMyInterest.com. Seven years and three patents later, Max is now the highest-yielding cash management solution in the United States, used by financial advisors at thousands of wealth management firms with more than $1 trillion of assets under management. With a top yield of 1.71%, Max stands above all other cash options offered by banks and brokerage firms – yet, the core premise remains the same as it was back in 2009: deliver the best yields, fully FDIC-insured, with same-day liquidity and no conflicts of interest.

While it may be difficult to envision now, the COVID-19 crisis shall too pass. And, if history does indeed rhyme, in its wake American ingenuity and determination will likely push our economy and financial markets yet higher – although the recovery may be long and uneven. As an investor, your appetite for risk may again increase, too. But for the portion of your portfolio that remains in cash, you should remain as protected and earn as much as possible.

The foundation for Max dates back to the financial crisis, when I was looking for a way to keep my own cash safe and liquid amidst broader turmoil in the market.  In the process, I discovered the higher yields available through online banks, and began managing cash actively to keep it fully FDIC-insured while earning the highest yield possible. This became particularly important as banks were cutting their rates during a rapidly declining interest rate environment.

We’ve made a tremendous amount of progress since then, creating what we believe to be the fastest and simplest account opening process in the industry, arranging preferential rates and terms available exclusively to our members, growing assets optimized through the platform dramatically, and attracting the attention of some of the most influential people in asset management.

We’ve also kept our ear to the ground, listening carefully to every one of our members to understand how they use Max to help them earn more on their cash.  We listened even more closely to those who didn’t enroll in Max, to try to understand why, since most people tell us Max is a ‘no brainer.’

Over the years, we heard six main requests from clients — ways in which they’d like to be able to use Max. Today, we’re launching an addition to the Max platform that addresses all six.

Introducing: Max Checking!

Our goal in launching Max Checking is not to get people to switch banks or open a new checking account.  Many people are perfectly happy with their existing bank and are unlikely to switch.  However, at Max, we’re constantly striving to do better for our members, and so we’ve worked hard to create a compelling offering that delivers better rates and terms than pretty much every bank in the country.  And so we do expect that, over time, many of our members will start to use Max Checking for more of their banking needs. But that’s not why we’re launching Max Checking.

Max Checking was designed to deliver on the promise of helping everyone in America earn higher returns on their cash.  Here are the client requests we’ve heard, and why Max Checking is the answer:

1. Please Support my Bank

When Max launched in 2014, to use Max you had to have an account at one of the four largest banks in the country: JPMorgan/Chase, Bank of America, Wells Fargo, or Citibank.  This was a logical place to start, since these four banks represent 37% of the nation’s deposits.  Over the years we added support for more banks, and now can support customers with checking accounts at 20 of the largest banks and brokerage firms in the country.  But with more than 6,000 banks in the country, not to mention credit unions and brokerage firms, we knew we could do better.  With Max Checking, you can now benefit from some of the highest yields in the country regardless of where you bank or invest.  Simply open Max Checking in 60 seconds and you can then link all of your existing bank and brokerage accounts to Max Checking so you can earn more no matter where you bank or invest.

2. I Want to Link Max to my Savings Account, not my Checking Account

Max’s core architecture originally required that you link your existing checking account to Max.  But many of our members wanted to link Max to their savings accounts instead.  Now, you can link your savings, brokerage, or checking account to Max Checking and start earning more.

3. I Want to Link Max to Multiple Accounts

Many of our members have multiple banking relationships.  Max’s existing architecture required that you pick one bank to link to Max as your ‘core’ checking account, but we saw many of our members using Max to move funds from one bank to another.  With the launch of Max Checking, you can now link multiple checking, savings, and brokerage accounts at multiple financial institutions, so Max can help you earn more on all of your cash, regardless of where it currently sits.

4. I Want to Earn More but Don’t Want Max Sweeping Funds in/out of my Main Checking Account

Max was originally designed for households who saw no distinction between checking and savings. Over the years, we’ve come to know many people who are saving for a specific purpose, and who prefer to allocate a discrete amount of cash into savings to earn more, without touching their checking account.  With the launch of Max Checking, you can now earn more on savings without Max sweeping funds in/out of your existing checking account, so you’ll have even more control over your funds.  Simply make a deliberate allocation of cash to your new Max Checking account and from there, Max will automatically move excess cash to your even-higher-yielding online savings accounts.

5. I Like the Idea of Max but Don’t Want to Share my Credentials

Early on, many prospective Max members were concerned about sharing their login credentials with Max. That’s understandable. With Max Checking, it is now possible to enroll for Max, open up a new checking account and four high-yield savings accounts with preferential rates without ever typing in a bank login or password.  You can even fund your account by wire if you choose, but even if you fund by ACH, Max will never be privy to your bank login credentials.  

With the Max Common Application, we’ve made account opening simple, so you can open multiple bank accounts using a single form without logins, passwords, or the trial deposits that many people have come to associate with online banking.  Faster, simpler account opening.  More FDIC insurance coverage.  Higher rates.  That’s the power of Max!

6. I Want to use Max but Don’t Want to Pay Any Fees

From Day 1, we’ve been committed to our members’ privacy and security. As part of that commitment, we’ve sought to avoid any conflicts of interest. So unlike many websites that offer their products for ‘free,’ only to monetize your data in the background, we don’t sell your data, we don’t accept advertising or referral fees from banks, and we don’t cross-sell other products. 

To cover its costs, Max charges a nominal membership fee to its members. Membership costs just 8 basis points per year, or $80 per $100,000 of cash, which is half of what a typical money market fund charges, yet Max delivers greater liquidity and higher yield.  The higher yield available exclusively through Max often far outweighs our membership fee. Max also includes many additional features such as easier account opening, automatic monthly optimization, one-click funds transfers, and consolidated tax reporting.

Still, we wanted to find a way to do even better for our members.  So, if you choose to keep larger amounts of cash in your new high-yielding Max Checking account, our banking partner, Radius Bank, will reimburse your Max membership fee, up to $200 per year.  For many of our members, this means that Max will be free!

I’m proud of our team, who has worked creatively and tirelessly to bring these new innovations to market.  And I’m even more proud that as an organization, we’ve managed to stay true to our core mission: your best interest.

To learn more or get started earning more, visit MaxMyInterest.com/MaxChecking.

The financial industry is abuzz with a bevy of new cash solutions aimed at individual investors. Each offers benefits versus keeping funds in traditional bank or brokerage accounts. But it’s important to read the fine print – not all solutions are created equal.

Fundamentally, people hold cash for two reasons: safety and liquidity. Safety typically refers to the preservation of value or the use of cash as a hedge against turmoil elsewhere in the portfolio. Liquidity is for paying monthly bills, funding capital calls, or for the option value inherent in being able to invest at a moment’s notice.

The latter is why Warren Buffett loves cash so much. Holding lots of cash on hand enables you to be “greedy while others are fearful” and also provides the psychological cushion necessary to weather the ups and downs of the market. This may explain why, according to Capgemini, the average high net worth household keeps a surprising 23% of its investable assets in cash. In the midst of the financial crisis when everyone else was selling, those fortunate or prescient enough to hold cash were buying – and they profited handsomely. Had you bought the S&P 500 at the market trough, you’d be sitting on a 300% gain right now, a once-in-a-generation event in public equities investing.

If the most important aspects of cash are that it be kept safe (i.e., fully FDIC-insured) and liquid (i.e., immediate accessibility), why are these new cash solutions falling short on both fronts?

The answer is in the fine print.

Behind each of these cash-like offerings is an old system of brokered deposits. Invented nearly 20 years ago, brokered deposits were a simple way for banks to offer customers increased FDIC insurance coverage to prevent customers from opening up additional accounts at competing banks. Unfortunately, brokered deposits don’t offer same-day liquidity, and sometimes cap withdrawals at as little as $100,000 per day. And brokered deposits aren’t always fully FDIC-insured since deposit brokers often place funds at banks where you might already have a bank account, resulting in less-than-full coverage. Investors typically need to read the fine print to figure out where their funds are being placed and then mail in a written letter to request that certain banks be excluded from the brokered deposit program. Hardly a transparent or practical option for most investors.

Brokered deposit systems work by taking your deposits and selling them to other banks. The deposit broker collects a high-interest rate from the recipient banks – circa 2.50% in today’s market – then keeps a spread for itself, perhaps 0.20%, and passes on a net yield of 2.30% to the client. While advertised as “free,” this offering isn’t “free” at all. As a customer, you’re paying 0.20% for this service, and if you read the fine print, you’ll find that you are taxed on the full 2.50%, even though only 2.30% of that will ever see its way through to your account. Need access to your money the same day? You’re out of luck – your funds are locked up by the broker and not available until the next day. Changed your mind and want to withdraw all your money? You may not be able to do that either due to withdrawal limits imposed by the broker. And if the originating institution fails, you could lose access to all of your funds until the FDIC resolution process is complete.

What’s shocking about these recent developments are that some robo advisors are RIAs that should be acting in a fiduciary capacity are now co-opting the same tools that broker-dealers have used for years to make money on their clients’ cash while marketing these solutions as “free.” They are by no means free. That spread that they keep for themselves is the fee. It’s just hidden in the fine print.

Investors seeking higher yields on their cash have other options. They can look directly to online banks, or solutions like MaxMyInterest, which helps clients obtain increased FDIC insurance coverage, preferential yields, and same-day liquidity on the cash that sits in their own bank accounts, in a manner that’s fully transparent and free from conflicts of interest.

If you’re sitting on cash, you may be fortunate enough to benefit from the next market dislocation. Before you decide to move that cash in search of a higher yield, I encourage you to do one thing: read the fine print.

Gary E. Zimmerman is the Founder and CEO of MaxMyInterest, an independent, intelligent cash management solution that helps individual investors earn more on their cash, free from conflicts or cross-sell. Visit MaxMyInterest.com or MaxForAdvisors.com for more information.

If you have a financial emergency — an unexpectedly high medical bill, a sudden move across the country, or a job loss — how will you pay for it? Most financial advisors recommend keeping a separate emergency fund that you wall off from your retirement and other lifecycle-related savings accounts. This will allow you to meet urgent funding needs without having to take money from your retirement or educational accounts, which can lead to penalties and tax bills.

It can be difficult to get started with an emergency fund, especially if you’re focused on specific savings goals like buying a house or paying tuition. The best way to make saving a habit is to use behavioral-finance techniques to your advantage. Open an online-savings account at a bank that pays high interest rates, and set up automatic monthly transfers from the main checking or brokerage account where your paycheck gets deposited. That way, you won’t have to think about making a manual deposit. It’s okay if you start with a small amount; the important thing is to be consistent.

While you’re setting up your emergency fund, make sure that you’re earning the highest interest rate possible. This will harness the power of compound interest, which means that the money in your account will earn interest as it sits there, and, if you don’t take it out, will accumulate as the interest goes back into the account to earn even more interest.

Why does this matter? Your emergency fund, by design, is money that you are going to keep on the sidelines and — hopefully — never have to use. Because you are not going to invest it in securities, which are risky, you want to make sure that you can earn as much as possible in interest on your cash in this account. Earning higher interest can help your emergency fund keep pace with inflation.

It’s also important that your emergency fund be kept in an account that’s fully liquid. If you have to access this money, you may need it immediately; you won’t have time to wait the three days that a money market fund will take to get the money back to you. An online savings account solves this problem. You can have the money wired back to your checking account same-day.

Are these accounts safe? Any bank account that is FDIC-insured is backed by the federal government up to $250,000 per depositor, per account type, per institution. If the bank goes under — unlikely, but still possible — the FDIC will return your money up to this limit.

One good way to make sure your emergency fund is FDIC-insured and kept in the highest-rate online-savings accounts possible is to use technology solutions, like MaxMyInterest, to manage it. Max isn’t a bank; it’s software that automatically allocates your funds among high-yielding accounts at online banks, to make sure your money always earns as much as it can safely. You can learn more at MaxMyInterest.com.

Investors in the U.S are holding a quarter of their assets in cash, a new survey from UBS Global Wealth Management found this week.

The quarterly Investor Sentiment survey, which analyzed 3,653 investors’ holdings in the U.S., looked at investors with more than $1 million in investable assets during the month of March.

Around the world, investors are holding an average 32% of their portfolios in cash, while in the U.S., 23% of investors’ assets are in cash, the study found. U.S. investors hold less cash than those in Europe (35%), Switzerland (31%), Latin America (36%) and Asia (36%).

This is not what financial advisors would recommend to high net worth investors.

“Cash is a safe asset for a liquidity strategy but a risky one for longevity,”  Paula Polito, Client Strategy Officer at UBS Global Wealth Management, said in a press release announcing the survey’s results. “Right now, we see high levels of cash globally. This is a good time for investors to consider a more diversified portfolio.”

Financial advisors may not recommend a cash allocation that’s as high as this, but investors are likely holding onto all that cash for what they consider logical reasons. Some are waiting for the stock market, now hovering close to all-time highs, to fall so that they can buy in at lower levels. Others have a conservative bent and prefer to keep some assets in cash where it’s not at risk. And some are keeping cash in anticipation of a large purchase, like a home.

What’s nearly certain is that most, if not the vast majority, of this investor cash is earning less than it could. The average interest rate on cash held in savings accounts is now 0.10% (10 basis points). How can an investor earn more on cash? CDs generally pay higher rates, but they lock up investors’ money for a fixed term. Fixed-income investments also pay more, but they are not FDIC-insured, and involve risk.

This is where Max is helpful. The top rate on the Max platform, available only to Max members, is 2.71%. If an investor in the UBS survey has $1 million in assets, including $230,000 in cash, he or she is making, on average, $230 a year in interest on that cash in the bank. The same investor would earn $6,233 each year with Max. That’s the highest rate on FDIC-insured cash anywhere in the country. This interest compounds year over year, to generate even more return on risk-free cash.

Learn more about how to get started with Max and get your cash working harder for you.

When we launched Max back in 2014, the premise was very simple: online banks have lower operating costs, and so should be able to pay higher yields to customers than their brick-and-mortar counterparts.  The market dynamics were very similar to what we observed in the word of e-commerce: eliminate storefronts, and goods naturally cost less.  In the case of banking, rather than lower prices, online banking makes possible higher interest rates.  Back then, the average Max member was earning 0.88%, or 0.76% more than the national savings average.  Not bad.

Over the years, we’ve found ways to remove many of the frictions that keep people from earning more on their money.  With the Max Common Application, it’s possible to open multiple high-yield savings accounts by filling out a single form.  With our newest platform banks, we’ve been able to eliminate trial deposits, making it possible to link new savings accounts to your existing checking account instantly.  And for clients who join Max through their financial advisors, we can even eliminate form filing.  Imagine opening a bank account without ever needing to type in your name and address.

As rates have risen, Max members are earning even more.  Today, the highest yield on the Max platform is 2.46% — that’s not only higher than the highest nationally-advertised savings rate in the country, but it’s also a staggering 2.36% higher than the national savings average, which stands at just 0.10%.

How do we do it?  By eliminating customer acquisition cost for banks.  Most banks have to pay hundreds of dollars to attract each new customer account, through a combination of advertising and referral fees.  Who pays for this expense?  You, the depositor, by accepting a lower yield on your cash.  By contrast, Max does not accept advertising or referral fees from banks.  Not only does this eliminate potential conflicts of interest, but it also means that you can earn higher yield on your cash.

Take a look at your existing checking and savings accounts, or put a magnifying glass to your brokerage account statement to see how much you’re earning on cash.  If it’s lower than 2.46%, it might be worth taking a few minutes to see if Max could be right for you.

If you’re an accolyte of Japanese decluttering guru Marie Kondo, you are already familiar with her commandment to get rid of anything that doesn’t inspire happiness. Usually this applies to unnecessary things in your home or office: stacks of books you don’t plan to read again, toys your children have outgrown, clothes that don’t fit or are out of style. You might have accumulated souvenirs from travel — too many magnets on the fridge, or a surfeit of knicknacks on bookshelves — or been overly optimistic about how many old magazines you will actually open. Everyone has some area of their life that could use an anti-clutter intervention.

The same logic can be applied to any sort of encumbrance (do you have a vacation home you rarely visit?). So it’s reasonable to consider your investment portfolio to see if you’re getting the maximum amount of joy out of how you’ve allocated your assets.

Look particularly at the cash portfion of your portfolio. If your cash isn’t earning enough, it’s just like clutter: sitting there, taking up space, and not contributing to your happiness.

Here’s how you can make cash work harder for you:

1. Make sure you are earning the highest interest rates on your cash

If you keep your cash in a checking or brokerage account, or in a regular brick-and-mortar bank savings account, chances are you are earning close to the average interest rate on savings accounts of 0.10%. That’s a waste, because online banks are now paying more than 20 times that amount on cash, FDIC-insured.

1. Confirm you are not above the FDIC insurance limit on any of your bank accounts

The FDIC limit for deposit insurance is $250,000 per depositor, per account type, per bank. If you have more than that at a bank, the excess is not insured. You can solve this problem by opening accounts at other FDIC-insured banks (ideally those which offer higher interest rates).

1. Streamline your accounts to ensure a holistic view of your assets

The best way to gain an understanding of your cash is to be able to see a dashboard view of all your cash, no matter where you’re holding it. Many people don’t think about all the cash they have on hand as money that could be working; they only think about investments in terms of stocks, bonds, or other financial assets. Some people trade similar assets through trading platforms similar to questrade, you can learn more about their platform through this questrade review. But knowing where your cash is and what it’s earning is a key part of understanding your whole portfolio.

1. Automate your accounts to make sure your money is working for you

You can set up multiple online bank accounts, research their interest rates, and move money among them to make sure you’re always getting the best rate. But this DIY approach is a lot of work, and it violates another principle of decluttering your life: simplifying your schedule so that you can spend time doing what you truly enjoy.

Instead, a service called Max can do all this for you. Max helps you link your existing brick-and-mortar checking account or brokerage account to higher-yielding online savings accounts where you can earn more. Max monitors rates daily and automatically moves your funds so that you’re always earning the highest rate. Learn how Max can help you earn more on your cash.

For a generation that’s grown up with a smartphone in hand, millennials are surprisingly wedded to the most old-fashioned of investments: cash. That’s a conservative strategy, but it raises the specter of whether these young workers will build their portfolios quickly enough.

Americans between the ages of 18 and 29 were the most likely age group to choose cash as their ideal place to stash money they don’t plan to use within a decade, according to a survey from Bankrate.com. Thirty-nine percent of millennials said they would invest their money in cash if they didn’t need it within 10 years, triple the number who said they would buy stocks.

That could be a problem, because investment returns, compounded, tend to grow over time, if a portfolio is performing well. The more millennials earn on their investments today, the more these gains can grow throughout their working years. For Americans as a whole, one in four said they’d pick cash over other long-term investments. The report also found that Americans feel they haven’t saved enough money. For every survey participant who thought they had saved a sufficient amount, two survey participants said they don’t have a large enough savings reserve.

The report points to twin problems investors have today: a propensity to hold cash to avoid risk, alongside a nagging feeling that their portfolios won’t be large enough to support their future needs.

There are many reasons why millennials, and Americans as a whole, might feel more comfortable with large cash holdings. The global financial crisis is only a few years in the past, and many market participants might still hold bad memories of that experience. Warren Buffett’s Berkshire Hathaway now holds $111 billion in cash. Many millennials either suffered losses among their own investments during the last crisis or watched family members lose money in the markets. With cash, they’re not taking a gamble on stocks.

Similarly, the housing market crash and subprime-mortgage bust that accompanied the crisis may have sparked an aversion to buying real estate (or perhaps millennials just can’t afford to buy houses). Millennials as a group also owe record amounts of student debt, and they may feel they can’t risk the money needed to make those payments. All this contributes to a desire to hold cash rather than riskier investments that hold the potential for a higher return, such as real estate investing itself, if millennials are looking for profit opportunities they have many options open to them, such as real estate investing courses via Roofstock, this gives them the option and interest to invest in something other than cash, and for possible massive returns too.

For investors of any age who want to hold a large portion of their portfolios in cash, it’s essential to consider both the interest rate on that cash and the degree to which their cash is protected by government deposit insurance. According to Bankrate.com, the average interest rate on bank deposits in U.S. savings accounts stands at 0.09%, while some online bank savings accounts pay more than 1.80% in interest, often with no minimum balance or monthly fees. Because of the power of compounding, that additional interest can make a large difference over a millennial’s long investment horizon.

As long as these online banks are guaranteed by the FDIC, the deposits are insured up to $250,000 per depositor, per account type, per bank, to guard against a bank failure. That’s essential for the investor who is holding cash to keep that money safe against all eventualities.

Here at Max, our system is ideal for investors of any age who choose to hold larger amounts of cash. Max helps depositors avail themselves of the higher interest rates paid by leading FDIC-insured banks. For millennials, signing up for Max could be a smart choice. Even if they’re not prepared to take greater risk by buying real estate or investing in the stock market, with Max they can at least earn up to 20 times the national average on the cash that’s sitting in their checking or brokerage accounts, while helping ensure it is fully protected by FDIC insurance.

Learn more about how Max helps investors earn higher yields on cash.

While Max members have always earned much more on cash than the typical American depositor, as interest rates rise, the benefits of using Max are increasing even further. Since 2014, the incremental yield, or alpha, that Max has generated for its members has increased from 0.76% to 1.23%.

According to Bankrate.com, the national average interest rate earned on savings accounts is 0.09%. Max members, however, are earning dramatically more — 1.42% on balances up to $250,000, and an average 1.32% on larger balances up to $1,000,000.

Why does earning more on cash matter? Because interest compounds over time, meaning that the gap between those who manage their cash wisely and those who don’t widens as years go by.  Since all FDIC-insured savings accounts carry a government guarantee and are essentially risk-free, focusing on the banks that can deliver the highest yield makes sense. Leaving your money in a brick-and-mortar savings account that pays the national average — or worse — means you are missing out on the opportunity to earn an additional 1.23%, on average, without taking any additional risk with your money. In fact, because of Max’s feature that helps spread cash across multiple banks to maximize FDIC insurance coverage, many Max members are earning higher yield while taking less risk.

While online banks have gradually raised rates over the past several months, brick-and-mortar banks have yet to do so in a significant fashion. Online banks are able to offer higher interest rates to savings-account holders because they don’t have physical branches to maintain. This means that if you don’t keep your cash in online banks, you likely aren’t keeping pace with rising rates.

For financial advisors, the ability to help clients earn more on their held-away cash — typically cash that advisors don’t see — is a major reason why many are recommending Max to their clients. As a fiduciary, charged with looking out for their clients’ best interest, many advisors feel it is imperative to offer Max to their clients. Incremental yield on cash is, after all, the same as incremental yield anywhere else in a client’s portfolio — but in the case of FDIC-insured cash, it comes without risk.

To learn more about how Max can help you or your clients earn more on cash, visit MaxMyInterest.com or MaxForAdvisors.com.