I do asset allocation: 10% in cash. 40% in equity mutual funds. 60% in bond mut funds.
I've had the cash in Vanguard money market funds.
Wondering about keeping some of the cash in HYS account to get ~5% interest.
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It's actually the other way around: a savings account (high yield or otherwise) is likely to be insured by the FDIC. We can't verify without knowing the exact account, but this should be prominently displayed when you sign up for the account.
On the other hand, from Vanguard's website on their money market accounts (https://investor.vanguard.com/investment-products/money-markets)
An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
In general, money market accounts are not FDIC insured. So, if you get a higher rate than a money market account with an insured savings account, there doesn't seem to be a lot of downside. Do note that money market funds at Vanguard such as VMRXX are currently (July 2023) at ~5% interest as well, so if you are seeing a big difference in a HYS, you may be in the wrong money market funds.
Generally speaking, the safest money markets and any savings account are equally safe up to $250,000. Beyond that, the safest money markets are generally safer.
Each can be safer, depending on the details. You can find money markets that are, for all practical purposes, completely safe, and all savings accounts are safe up to 250,000—except you may have to wait to get your money if the bank fails.
A money market account invests in short-dated highly safe bonds. Some directly "park" their money at the fed, which is the safest form money can take. Others own only federal bills, which
A savings account is insured by the FDIC up to $250,000. Beyond that, you can lose money if the bank makes a risky investment and fails (cf. Silicon Valley Bank). By contrast, you can lose money in a brokerage account only if the bank commits fraud, or the asset itself loses value.