I’m young and a student and I have most of my savings in a VMFXX money market account which I basically use as a low risk place to set and forget my money. Most of this fund is federal cash and securities. I like that it is there when I need it and that it makes more interest than a savings account.
I’ve been hearing vague things about Elon Musk messing with the treasury since Trump got elected and there is just seems to be a lot more uncertainty in the federal government overall.
The value of the money in this money market account has never dropped before, but is there any risk that the current administration could mess things up enough that my savings could be at risk? If so, is there anywhere else I could leave my money that would be similarly low risk but earn more interest than a savings account with my credit union?
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I think it is safe. It invests mostly in US gov’t debt, which is considered the safest investment in the world. If the US gov’t defaulted, it would be a disaster for the whole banking system. That hasn’t ever happened, going back to the when the government was founded.
A third of it is in repurchase agreements, which became illiquid during the 08-09 financial crisis. MMFs like this one were in danger of “breaking the buck,” falling in price to some value less than $1 a share. To prevent people from withdrawing their money, worsening the crisis, the government stepped in and insured these funds similar to FDIC-insured bank accounts. The yields dropped to be the same as FDIC-insured bank accounts. I am not sure if they would do that in a similar crisis in the future. So FDIC-insured bank accounts are slightly safer, but they’re both very safe.
If you’re really trying to protect yourself against catastrophe, which I think is much less likely than the risk a healthy person dies of a sudden health problem or an accident, you could keep some gold or silver coins. They have stayed at the same value since antiquity, at least to the extent you can compare modern goods and services to ancient ones.
This one looks to be based on currently interest rates for short term US Securities, so it follows the rates set by the Fed. If there’s a rate change, there’s an announcement. This is about the safest thing you can do - it’s not like you can have fewer dollars with it.
