I currently have a Vanguard account (Mutual Fund) with about $10,000 in it (more now). I have a savings account with about $7,000 which I consider my "rainy day" fund and I try to put money into my savings monthly (last couple of months, I've had to buy stuff for the house so it should be $11,000 but had to drop some serious cash).

Anyways, I want to close my savings account and move my money and get better yields. My brother in law suggested that I put my money in my Vanguard mutual fund. I also began looking into money market accounts. Since my savings is my rainy day fund, here are some requirements:

  1. Liquidity: I need liquidity because it's my rainy day fund.
  2. Interest: It doesn't have to be super high but it'd be nice if it yielded more than 0.05% or whatever it is my bank gives me.
  3. Secure: FDIC backed is a HUGE plus.

Any advice? Would I be better off switching to a money market account? Would a mutual fund do exactly the same thing as a money market or savings accounts? Thoughts and advice are welcomed!

  • 1
    if you want more return you'll have to take more risk, and if you want FDIC deposit insurance that doesn't cover money market accounts. I'm assuming youre in the US, but youre probably stuck with a savings account. Why not use an online account like Barclays (the one I use) that pays 0.9% annually? That's higher than the 0.05% you earn in a normal bank account at a bank branch but still FDIC protected.
    – Michael A
    Nov 18, 2014 at 18:43
  • I'm in the US, yes. I'm going to discount Money Market Accounts and looking at savings accounts from Barclays. Would it make sense to treat a mutual fund as if it were a savings account (I pull money out of my savings every so often)? Nov 18, 2014 at 19:14
  • No it wouldnt make sense to treat a mutual fund as a savings account because your money isnt nearly as safe in a mutual fund as it would in a savings account. Look at the prospectus of a mutual fund; itll say that its subject to risk while a savings account shouldnt be and a savings account should be FDIC insured.
    – Michael A
    Nov 18, 2014 at 22:19

1 Answer 1


Liquid cash (emergency, rainy day fund) should be safe from a loss in value. Mutual funds don't give you this, especially stock funds. You can find "high yield" savings accounts that are now at around .8% to .9% APY which is much better than .05% and will hopefully go up. Barclays US and American Express are two big banks that normally have the highest rates.

Most/all Savings and Money Market accounts should be FDIC insured. Mutual funds are not, though the investment IRA, etc. holding them may be.

  • To say that mutual funds "don't give you [safety] from a loss in value" relative to the safety of FDIC insurance is not quite correct. As shown here, although there's no actual insurance on the Vanguard Prime Money Market mutual fund, since its inception in 1975 nobody has ever lost money in the fund, no matter how much they had invested. Meanwhile, anyone with more than $250K in an account at any of these banks lost that extra money.
    – dg99
    Nov 20, 2014 at 20:55
  • Agreed mostly. I wasn't thinking of a money market, more of an investment fund: growth, index, etc. Nov 21, 2014 at 13:45

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