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I've got under $10,000 that I want to put somewhere more awesome than my no interest checking account.

So far American Express Personal Savings at 1.15% APY is sounding nice. I can transfer out of it and funds take less than a week to hit my checking account.

The other option that I am looking at is a Vanguard Money Market Fund. Am I reading it wrong or are all of the 1 year rates of return at Vanguard about one-tenth of American Express's Personal Savings rate? Are money market funds a place for a longer term investment (like CDs?). Is it possible to pull money easily out of a money market fund?

Or am I missing something and there is a better place to keep my cash? Ideally I want to have around $10K sitting somewhere where I can easily grab it in case of emergencies. The point of what I'm trying to accomplish is to have 3-6 months of backup money for a just-in-case moment.

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Right now interest rates are pretty low and as such you won't see blockbuster interest rates in anything highly liquid. That being said you're motivation is liquidity over rate of return anyway so I don't think that is a concern.

Money Market funds should give you a similar return to AMEX Personal Savings. Due to their lack of a rate guarantee I wouldn't be surprised if that is simply a branded Money Market account.

Your best bet is to look at what rates you can get on any short term security and park your money in the one that best suites your needs and offers the greatest return.

Money Markets are simply a great way for you to keep your cash liquid while investing you in a broad range of liquid assets (diversification is key).

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I would put about a month's worth of expenses in the highest-paying savings account that you find convenient to access. For the rest, I recommend Ally's High-Yield CDs — specifically, the 5-year option.

Normally 5 years would be way too long to commit short-term savings to a CD. However, the Ally CDs allow you to break them for a penalty of only two months worth of interest. If you look at the graph below (from when the rates were 3.09% APY), you can see the effective interest rate at every possible time you break the CD early. Doing the math, if you can keep your savings in the account for at least four months, it will outperform any other current FDIC-backed investment that I am aware of, for the length of time the money was invested.

(credit: MyMoneyBlog)

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  • Heh, rates are only 1.59% for the aforementioned CD nowadays. That diminishes the value of it.
    – Bigbio2002
    Commented Mar 8, 2013 at 16:33
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    Not if you consider that it's still a much higher interest rate than other comparable investments.
    – Stephen Touset
    Commented Mar 8, 2013 at 19:28

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