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Hey friends. So in this video I wanna share how I stopped using a traditional bank
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and moved to a brokerage account that has saved me hundreds, if not thousands of
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dollars, has made me thousands of dollars in interest in dividends, is incredibly
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convenient, has automated all of my wealth building habits and systems, and really
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sits at the center of everything I do with my money. And I think it's the most slept
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on account. And I often think that that's because they don't offer commissions for
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affiliate links. So you don't hear people talk about this account as often. And so
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maybe there's a little bit of bias there from, from people that are usually talking
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about high yield savings accounts. I don't know, but I wanna share with you this
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one, and that is the Fidelity cash management account. And I think it is the king
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or queen of, of all types of,
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cash management products. And I wanna share with you why and how I use it in this
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video,
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and how you might be able to, and I'll share my exact setup. I still have a traditional
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bank that I keep just a little bit of money in, and I'll tell you why later so that
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you can kind of make the decision on, on what's right for you and your situation.
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But the main thing that I want to highlight from a mindset perspective before I get
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into the features and how, how this all works is my focus on wealth building is always
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about how you can kind of squeeze out and maximize every single dollar. And when
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it comes to banks, I don't like the idea that a bank is profiting heavily off of
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money that I have sitting there. And if you are at a traditional bank today, and
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you're not getting, you know, let's say about 4% interest rate on your money,
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I won't say they're stealing from you, but they're certainly not giving you the money
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that you deserve for your money. And that's the way banks make money. They, they
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take in deposits from customers and then they loan it out at a higher rate. And so
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they're making all of this profit between what you're not getting and what they're,
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they're getting in loans and oh, by the way, they get cheap money from the government
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that they, they also loan out. So my goal is to not give my money freely to the banks
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and find banks and services that are more willing to share in the profit of, of using
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my money for, for their business. And so that's why, and that's kind of the mentality
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that I go into this with, is how do I maximize money for myself and not banks? So
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I would implore you if you are at a traditional bank today, and no matter how, you
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know, large your account or small whatever is, if you're not making about 4% on your
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money,
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you know, maybe not today, but in the next week, look into getting into a high yield
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savings account and moving your money to a place where you start earning a little
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bit more money. 'cause it all starts to add up. And also be looking for places that
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don't have fees. So Fidelity and the cash management account kind of does this all
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for me, and I found it to be the best of all of them. So let me walk you through
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why I think so and, and what this whole thing is. So here, here's the things that
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we'll we'll walk through. So you get some of the highest interest rates better than
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any individual bank is ever gonna give you. In money market funds that you never
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actually have to trade or invest in, it happens all automatically for you. It converts
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all of this money into cash automatically. You get paid dividends on the first of
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every month.
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so whether it's a dividend or interest that money's automatically there. You don't
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have to deal with setting up direct deposit or any other requirements that banks
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have.
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there are no fees ever. There's incredible ATM features we'll get into like how I
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never pay ATM fees when I'm traveling internationally.
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we'll talk about how to auto save and invest and how you can set up multiple cash
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management accounts to set up rules where you, you transfer between accounts,
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and, and they stay up to date with, with security, with two-factor authentication
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and other things. So,
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I'll get into all of these,
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as I open up,
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the website here.
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Okay, so we're on Fidelity's cash management account webpage. And so let me start
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getting into why I made the switch from a traditional bank over to Fidelity,
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The first thing I love is that when I have this account and I treat it like a bank
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account, it basically ensures that I receive nearly the highest interest rate on
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cash that I have sitting around. And because there're a brokerage, they're able to
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do things that a traditional bank can't offer. The first one is that I can have this
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cash invested in a money market fund. And the amazing thing about this is that through,
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their, their automation in this account,
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even though it's invested in a money market fund, I can use that money like cash.
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So let's say I write a check or I do anything that a traditional checking account
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does,
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that money is automatically sold out of the money market to cover my, my service.
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So basically it operates just like a regular checking or savings account, but it
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has some key benefits. The biggest benefit for me is that it has nearly the highest
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interest rate from a market perspective. So I'm not dependent on a single bank offering
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me an interest rate. And what happens with a lot of traditional banks is they'll
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have promotional offers where they offer a high interest rate, but then that interest
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rate goes down over time. Or they'll have a requirement like, you know, you have
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to set up direct deposit and you have to do certain amounts of debit card transactions
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and they add all of these hoops to, to you getting some interest on your money. Well,
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with this, I don't have to do any of that. I just automatically get, uh, a high interest
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rate on, on the cash that I have.
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Not only that, but then the money market rates that the market follows are going
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to beat a traditional high interest savings account percentage. So for instance,
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on on today, January 30th, this is trading at 4.03% on your cash. If look at high
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yield savings accounts today, it's at out about 3.8%.
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And I don't have to do any extra work or, or do any hoops for it, and I don't have
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to worry about a single bank decreasing the amount of interest that they decide to
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give me. So one thing to know about money markets is that they do carry an ever so
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slight amount of risk. And so let me click into this.
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What you can see is that this money market fund is SPACs, S-P-A-X-X, which is their,
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their ticker symbol. And it has different investments inside of it. And so if we
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go to composition, you can actually see what a money market fund is made up of.
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Primarily it's all made up of US treasury bills and US government based securities,
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which are short term liquid and highly secure.
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because the whole point of a money market fund is that it is an incredibly secure
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cash-like investment that provides a really modest return,
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The only thing that I would call out is that in 2008 in the great recession, the
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Lehman Brothers money market fund actually started to lose a little bit of value
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compared to the dollar. And that sent shockwaves through the financial system because
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there's this assumption that a money market can never lose money. And so that was
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a a, a big incident that was known as breaking the buck. So if you are interested
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in financial history, you can look that up and read more about it. The the key thing
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was that it was two to 3 cents on the dollar that it tracked. So a, a very small
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amount of return lost and any money that a retail investor did lose was, was made
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whole. And and so really, you know, for me, I don't see any real concern with the
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idea of having my cash in in a money,
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highly conservative money market. The other thing to know is that there's almost
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$6 trillion worth of money put into money market funds between the US government,
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banks and companies and retail investors and professional investors. And so for me,
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a money market is a highly secure, great option for earning a little bit of extra
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money on my cash.
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Now, there's another option as well. So if you didn't want to go with the money market
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cash equivalent, you can go with the FDIC insured amount. And so what the FDIC is
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is it ensures that you'll never lose money if you make a bank deposit, it actually
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ensures up to $250,000 per account that you have. The cool thing with Fidelity is
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that because they're a brokerage, they work with many banks within this offering
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to store your money. And so they actually advertise that you can have up to $5 million
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protected in a single account. And they do that because let's say you, you go above
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$250,000, well then they will send the remaining money to another bank so that the
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account in whole is always protected. And so if you're one of those people out there
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that is sitting on a million dollars in cash that you're wanting to make sure is
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FDIC protected one, good for you? Maybe I'll set up a buy me a coffee or something
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and you can,
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gimme a tip. But,
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you know, so, so you know, this is always an option. It just does give a a lower
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interest rate and for me,
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it's, it's never been worth it given the high amount of security that I have in,
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in a money market. Again, you know, I'm, I'm not your financial advisor and so you
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have to make your own decision. But the cool thing is that these basically operate
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like cash either way. So this basically becomes your checking or savings account
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that is earning a competitive rate and you don't have to do anything for it.
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So then the next thing I love is the ATM fee reimbursement. And this has saved me
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probably thousands of dollars. So you never pay an ATM fee no matter where you are
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in the world. And so if I'm traveling overseas, I will just use my debit card from
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this account and I'll put it in an ATM. I've been to Japan over Europe, it doesn't
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really matter.
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And so for me, that's absolutely incredible. If you ever have tried to convert currency
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at an airport or something, you know that you pay a ridiculous fee for doing that.
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And now I'm able to go anywhere in the world, basically just withdraw money in, in
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the currency that I need and I don't pay any anything for it.
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The other cool thing is that there's no fees. And so, you know, there's no fee for
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account setup, there's no fee for having a checkbook and writing checks. There's
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no, you know, keeping a certain amount of money in there. And so I never have to
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worry about fees in anything. And so between earning the best rate, having no fees,
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the ATM fee protection,
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that that alone has saved me thousands of dollars on the one hand and earn me thousands
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of dollars on the other. But now I wanna talk about personally why it's been amazing
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for my wealth journey from an automation perspective and what I can do within, within
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the Fidelity ecosystem. So I'm gonna go to that next.
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So to show you an example of the power of automation that you can use in these accounts,
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here I am looking at a one of my cash management accounts and I can set up recurring
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trades. So if there's a stock or index fund that,
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I'll talk about when we get into investing more,
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I'm able to select how often I wanna invest. And so maybe I want to invest once a
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week, maybe I get paid every week and so then, you know, on Friday I'm gonna invest
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a little bit of money or you have the option to, uh, invest every two weeks or monthly.
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You could also set up transfer rules over here on the right. So again, if you open
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up multiple cash management accounts, maybe one account I get my paycheck in, I set
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up a transfer rule to transfer money to the other one at a set interval.
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Okay, so then outside of automating investing and transfers between accounts and
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being able to open up more cash management accounts to handle however you decide
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to budget,
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there's a ton of really seamless,
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banking services that you can do straight from the website. So for instance, you
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can set up bank wires, you can do automatic bill pay if you wanted to do a bill pay
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directly from the Fidelity side of things.
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check writing is free, so you can order a free checkbook, same thing with your ATM
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and debit card.
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you can easily set up a direct deposit, so it's just like a regular bank account,
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you get a routing and checking number. So,
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really for me, it it, it handles everything that a bank does seamlessly, but then
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adds even more with the options to be able to invest. And the, again, the ability
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to be able to open up multiple accounts makes automation so incredibly easy.
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Now, the only thing I will say, and I, I forgot I was gonna mention this, is I still
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do have a traditional bank. Why do I do this? Two reasons is there's no way to deposit
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cash into these cash management accounts. So if you are someone that,
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gets paid in cash in any way, or you know, you just want the flexibility of being
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able to deposit cash,
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it's still helpful for me to have like a local branch that I can go into. And so
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I keep so little in, so little money in, in these other bank accounts that I don't
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really have to worry about, you know, what interest I'm getting on the money and,
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you know, it still keeps the convenience of having a branch,
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when I need it. The other thing is that if you do services like plaid, which is,
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an ability to kind of automatically transfer money, fidelity doesn't play well with
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Plaid from what I've seen. And so I keep a, a Chase account open, that still allows
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me to do some of those things.
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but again, this is my, my primary,
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go-to. And so,
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that, that's the only reason that I would keep,
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a traditional bank account open.
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and, and if, if I didn't do those things often, then, then this would be my go-to
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all the time.
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So to put all this together just real quickly, what this can look like and like the
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system I've built for myself is, you know, you could have a paycheck come in and
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that automatically gets deposited into your first Fidelity cash management account.
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It's always free to open more cash management accounts, and so you can set up rules
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to really easily transfer from one CMA to another. So maybe you create one that,
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that goes for savings, you have a third one that maybe is for investing money that
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you want to invest. You can always o open up more for other goals that you have.
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also because Fidelity is such a large brokerage, a lot of retirement accounts are
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done through Fidelity. So you might even have an employer that uses Fidelity services
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for like a 401k. So it's easy to see that in all in one place. It's really easy to
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transfer money from a,
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cash management account to different retirement accounts. I even put a health savings
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account in here because I kind of view that as a retirement account because of the
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tax benefits. But this is a really powerful ecosystem that you can build and it's
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all on the back of the benefits of,
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of a cash management account.
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Other comments I would make
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are, they have really good security. So I've seen them upgrade their security protocol
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over time. They now do two-factor authentication.
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I think you can use a Microsoft token. I'm not sure if you can use Google or not.
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but that gets away from,
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using a, a cell phone for two-factor authentication, which is important. Maybe I'll
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talk about that in another video.
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and then I, I do also appreciate their commitment to,
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what I see as like helping younger investors learn how to invest.
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they have a lot of cool, like free programs.
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So that wraps my review of the cash management account. Like I said, I have been
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using Fidelity for well over a decade and I've converted completely to using a cash
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management account as my primary bank account. And, you know, like,
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like we went through with all these features,
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I think it's an incredibly powerful tool that helps streamline a lot of what people
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are looking for.
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like I said, I think it's the most slept on type of bank account. They don't give
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any commission for signing up for accounts.
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maybe that's why people,
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you know, don't recommend it more, but for me it's, it's a huge benefit. And so it's
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one I would definitely recommend. I'd love to hear,
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you know, what banks you use in the comments or if you use Fidelity today or if you
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have questions about how to set up an account,
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feel free to leave me a comment and I'm happy to answer those. And, you know, hopefully
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if you don't do any type of high yield interest banking today,
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maybe this video will inspire you to start earning some money on, on the, the cash
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that you have sitting around.
