Assets Cash
 
 
 
 
 
 
 
 
 
 
 
The standard things matter: return, risk, liquidity, diversification

Return
Your return is the interest rate. For instant access cash you just look for the best interest rate you can. This will always be in an online account. If you want the benefits of a high street branch and a smiling face to answer your questions you'll have to pay for it - through lower interest rates.

You can keep switching accounts to find the best rates if you have the energy and nothing better to do with your time. Remember that every time you switch your balance will spend a few days in that strange banking limboland when you get no interest at all.

If you tie your money up for a fixed term you should expect extra interest for your loss of liquidity. To judge this you need to understand the yield curve.

Risk
Provided you have a balance of less than £35,000 in your account it is guaranteed by the government (under the UK's deposit insurance scheme). So if your bank collapses it will cost you nothing but inconvenience. This will not apply to accounts outside the UK or deposits with non-banks anywhere.

If you have large amounts in cash spread it between several banks (diversification).

Liquidity
Make sure you understand any withdrawal restrictions on your account. Any restraint on your getting at your money is a cost (to you). If you tie your money up make sure you have properly evaluated the benefit of hanging loose.

A few other things....

  • Donít be seduced (at least, only knowingly be seduced) by high interest rates that are really introductory offers.
  • Today's star can turn into tomorrow's dog. It's the marketing, stupid.
  • Make sure the Deposit Insurance Scheme applies to your account. Deposits with non-banks are outside the scheme, as are foreign banks and offshore accounts even with impeccable high-street names.

 

 

 

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