Maximising Returns on Large Cash Balances

Having a lot of cash might seem extremely safe and secure. Nevertheless, having a big cash pile in a regular bank account is a huge waste of money. While you lose purchasing power due to inflation and fail to gain anything during the period of low yields, it would be beneficial for you as an Australian to understand how to make that money generate profit. What you need here is a proactive approach to money management that would allow you to save your capital and create additional revenue sources.

Diversification and Risk Management Strategies

The management of a massive cash sum requires much more effort and creativity than trying to earn money off a high interest rate. Diversification, being one of the basics of wealth preservation, is still applicable in cash management as well. Storing all your cash reserves in one account would mean excessive exposure. Thus, it is highly recommended to split that money between different financial institutions, which would both secure your wealth under the government guarantee program and give you the opportunity to make the most out of different interest rates and promotional offers available in multiple banks. As a result, you can effectively preserve all your money while making extra profits at the same time.

CDs and Short-Term Bonds

In many cases, investing part of your money in some financial products might result in higher yields than having all the reserves stored in a liquid account. For instance, certificates of deposit, which are also called term deposits in Australia, provide a fixed interest rate for a certain period of time. As you commit to storing that money for a fixed time span, you become sure that those funds will bring you a predetermined yield regardless of interest rate movements in the market. 

Another way to invest a part of your cash reserves is short-term bonds. In contrast to bank deposits, these fixed-income instruments have relatively high rates while representing quite a conservative investment opportunity. In addition, the average life span of short-term bonds does not usually exceed three years.

High-Yield Savings and Money Market Accounts

While you lock some of your cash in CDs or short-term bonds, the remaining sum should be kept liquid to cover potential expenditures. To earn extra money in that case, high-yield savings account becomes one of the best destinations for such funds. As there are many digital banks offering higher rates than brick-and-mortar institutions, your easily accessible cash will produce decent returns. 

Also, you may also use money market accounts for your cash management purposes. Usually, this type of financial products offers even higher interest rate, depending on current market conditions. Besides, money market accounts usually require larger initial investments, making them rather inconvenient for small transactions.

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Finding the Right Cash Allocation Strategy

Ultimately, proper management of your cash reserves depends on matching the financial product to your needs. The main challenge you should focus on is finding an optimal balance between your liquidity requirements and the desire to earn more, and you can compare accounts from ING Bank and others. 

Allocating your funds among high-yield savings accounts, money market accounts, CDs, and short-term bonds will help you build a solid portfolio of your financial products. Take your time to examine current bank accounts in detail and redistribute your cash reserves in accordance with this approach.