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Should I move $$ for college from credit union money market to Vanguard money market?

AlmostThere2018AlmostThere2018 1344 replies49 threadsRegistered User Senior Member
edited September 15 in Parents Forum
I just noticed they are paying 2.1% versus 1.6% at our credit union. Is there any downside? Hidden fees? I already am a Vanguard customer.

We have $125k sitting in money market to pay for last 2.5 years of college for my D (proceeds from a real estate sale).
edited September 15
29 replies
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Replies to: Should I move $$ for college from credit union money market to Vanguard money market?

  • jym626jym626 55564 replies2896 threadsRegistered User Senior Member
    Is your question to move money from a lower interest rate savings to a higher rate? This sounds like a no-brainer.
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  • AlmostThere2018AlmostThere2018 1344 replies49 threadsRegistered User Senior Member
    @jym626 -- yes, that is my question, lol!

    I'm wondering if there's less security in a Vanguard money market b/c it's not a bank (no FDIC, etc.).

    Also, will fees negate the boost in interest? Maybe it is this obvious that I should switch -- just thought I'd crowdsource opinions if I'm missing something.
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  • jym626jym626 55564 replies2896 threadsRegistered User Senior Member
    As long as you aren’t tying up the funds before you need to access them and there is no penalty for moving them, Vanguard is fine (and you already have an account with them so must feel ok with them).
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  • cptofthehousecptofthehouse 29423 replies58 threadsRegistered User Senior Member
    You need to talk to a Vanguard rep and make sure you know all of the ramifications.

    Any advantage to sticking any of this into a 529 since earmarked for college? I ran all of out college money through 529s and paid the schools through them. Will be enjoying the slight but real right off on state taxes for the next ten years.
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  • jym626jym626 55564 replies2896 threadsRegistered User Senior Member
    To get a comparable rate of return in a 529 for someone that needs to pull the funds out in 1-2 years might require investing in higher risk stocks (or whatever the 529’s options are). The 2.1 Vanguard rate is guaranteed (assuming they don’t reduce it).
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  • LittleStitiousLittleStitious 34 replies0 threadsRegistered User Junior Member
    Anyone can open a Colorado Stable Value 529 and earn 2.49% guaranteed for the remainder of 2019. Rate will reset in 2020 (and likely go down) but can’t go lower than 2%.
    https://www.collegeinvest.org/529-savings-plans/stable-value-plus/
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  • KnowsstuffKnowsstuff 4249 replies17 threadsRegistered User Senior Member
    Talk to your investment broker. There might be things no one here is thinking about. We invested our 529 in an OOS fund and I forgot the reason.. Lol.. But it is just nice to know that the money is there and paying the schools through it is pretty easy.

    Let's us know what you decided to do
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  • SybyllaSybylla 3820 replies48 threadsRegistered User Senior Member
    edited September 15
    capital one 1 savings/mm is 2%, Ally is 1.9. ally no penalty CD for over 25K is 2.1% (all fdic, all free). Your CU rate is low so sure, move it, IMO not into the vanguard (non FDIC) MM account though, just for peace of mind. You could set up a CD ladder for the last use $$, 1 yr, 2 yr, 2.5 yr whatever works best to optimize interest. that gives you a rate of 2.3 up to 2.45. (google for latest rates)
    Hit boglehads, I dunno about talking to vanguard, the beauty is that you don't need to talk to anyone. A CD ladder will be a good plan as rates seem likely to drop. Plan it around due dates.
    edited September 15
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  • jym626jym626 55564 replies2896 threadsRegistered User Senior Member
    Our capital 1 360 is only paying 1% :(
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  • SybyllaSybylla 3820 replies48 threadsRegistered User Senior Member
    edited September 15
    Cap one 360 MM is FDIC and 2%. Usual caveats apply. (minimal 10K is probably why yours is low, look at Ally where 1.9% is no min)
    edited September 15
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  • ucbalumnusucbalumnus 78266 replies690 threadsRegistered User Senior Member
    jym626 wrote: »
    The 2.1 Vanguard rate is guaranteed (assuming they don’t reduce it).

    Money market mutual funds' yields can fluctuate daily based on the market for very short term debt (of companies or government entities, depending on the kind of money market mutual fund).
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  • RichInPittRichInPitt 931 replies12 threadsRegistered User Member
    I just moved to Citi at 2.21 when CitizensAccess dropped theirs from 2.2 to 2.0.

    They were 2.35 and 2.36 not long ago, so th8ngs are always changing.

    Realize that 0.1% on a $50,000 account is $50/yr. Consider whether it’s worth the effort of chasing tenths of a percent.
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  • jym626jym626 55564 replies2896 threadsRegistered User Senior Member
    edited September 15
    The vanguard rates can go up as well. Sure, the market an too, but short term stocks can be riskier.
    edited September 15
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  • doschicosdoschicos 21145 replies219 threadsRegistered User Senior Member
    edited September 15
    .
    edited September 15
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  • cptofthehousecptofthehouse 29423 replies58 threadsRegistered User Senior Member
    Though our 529s didn’t get the best rates, (one state’s Is supposed to offer great options), we didn’t keep enough money in there long enough for that to matter. We went for the state tax deductions and credits. One state allows a 10 year carry forward!!
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  • CheeringsectionCheeringsection 2463 replies75 threadsRegistered User Senior Member
    Just opened. a 1 year CD at CapitalOne yesterday with a rate > 2.2%. Check there before you do Vanguard.
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  • AlmostThere2018AlmostThere2018 1344 replies49 threadsRegistered User Senior Member
    edited September 16
    Thanks to all! Glad to see the FDIC thing is real and that there are better options out there. I will looking into higher rate of return MM and/or CDs.

    Tks again!
    edited September 16
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  • bluebayoubluebayou 26768 replies174 threadsRegistered User Senior Member
    edited September 16
    been a Vanguard customer for 30+ years and if you are asking about safety, the risk is almost nil. Even when Lehman went down and many MMF's went under $1.00 par, the parents bailed them out. Even teh Lehman customers got most of their money back.

    Question(s): how old is your kid? Do you need the money next year or in 5+ years? Are you in a high tax state and tax bracket? Is the money in your name or hers?

    If yours and high tax bracket, I'd look to a short or medium term municipal bond fund which is tax exempt.
    edited September 16
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  • politepersonpoliteperson 346 replies4 threadsRegistered User Member
    Vanguard has protections through SIPC and additional underwriters that provide ample security, comparable to FDIC. The return on a MM at VG (or Fidelity for that matter) will generally be better than unsubsidized MMs at most banks or credit unions. Having said that, if you are willing to work for it you can probably do marginally better with some of the options already suggested, in addition to chasing bank sign up bonuses and the like. For set it and forget it without any strings attached VG is hard to beat. The biggest return would come from capturing the state tax deduction for a 529, as already suggested, especially if your state allows carry forward. But that assumes you get a state tax deduction in your state. Also be mindful of effects on AOTC if you’re eligible.
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  • ucbalumnusucbalumnus 78266 replies690 threadsRegistered User Senior Member
    edited September 16
    Vanguard has protections through SIPC and additional underwriters that provide ample security, comparable to FDIC.

    SIPC guarantees that the securities held in your account at a brokerage will not be lost if the brokerage fails; it does not guarantee the value of those securities. See https://www.sipc.org/for-investors/what-sipc-protects .

    Regarding money market funds generally and their (usually very low) risk of "breaking the buck", see https://www.investopedia.com/articles/mutualfund/08/money-market-break-buck.asp and https://www.investopedia.com/investing/do-money-market-funds-pay/ . Note: the referenced US Treasury guarantee program for money market funds existed only for some time in 2008-2009.
    edited September 16
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