Just the Tip:
Cash waiting in your brokerage account or IRA sits in a default sweep, and at many firms that sweep pays close to nothing. Check the rate on yours today. If it’s near zero, move the cash you aren’t about to spend into a money market fund in the same account.
The sweep catches every dollar you haven’t invested yet, whether it came from a sale, a dividend you took in cash, or an old 401(k) rolled into an IRA.
At many brokerages, the default is a bank sweep, and its rate can sit near zero even when interest rates are high.
The bank holding those deposits lends and invests them, then keeps the difference between what that earns and what it pays you. A money market fund pays you what its short-term holdings earn, minus expenses, so its yield rises and falls with the Federal Reserve’s rate.
On $20,000, a sweep paying near zero earns a few dollars a year. Every percentage point the fund pays is worth $200 a year on that same balance.
Finding your rate takes a few minutes. Your statement shows where the cash sits, whether your broker calls it a sweep, a core position, or a settlement fund. The account’s cash settings or the broker’s rate page show what it pays.
If it’s near zero, buy a government money market fund by its ticker, the same way you’d buy any other fund, or switch to a higher-paying sweep option if your broker offers one. Leave enough in the sweep for trades you plan to make soon, since a fund has to be sold first and the cash usually arrives the next business day.
A bank sweep is FDIC-insured, and a money market fund isn’t. Our money market account vs. fund comparison explains how each one is protected.
Pull up your latest statement and find the cash line. If it pays near zero, ten minutes of work turns it into real interest.
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