Been doing this for a while now, and re-posting it in the financial area. It's a really nice strategy right now for money you don't want to tie up long term or risk in the stock market. Last few weeks we've seen 4.7-4.8 percent on the 28 day bills, and considering the state tax advantage it's a very nice option for safe reliable savings at this point in time. ---- http://socialize.morningstar.com/NewSocialize/asp/FullConv.asp?forumId=F100000015&convId=169644 Here is another easy money-making idea. If you have short-term money sitting around in a money market account, you are probably earning about 3.5% to 4.0%, before tax. If you want to earn a bit more, and avoid paying state and local taxes, here is what you can do. First, set up a Treasury Direct Account at www.treasurydirect.gov . It's easy to set up and all you need is your bank routing number and your checking account number. After you've set-up your Treasury Direct account, click on the "Buy Direct" tab at the top of the page. Under that tab, select "Bills" and on the next screen, enter either a 4 week treasury bill, a 13 week treasury bill, or a 26 week treasury bill. Then enter the amount you want to purchase (must be at least $1,000 and in $1,000 multiples..sorry, the maximum you can purchase is $5,000,000!) and submit. You can set up repeating purchases ahead of time and it will be done automatically. There are no fees for the Treasury Direct Account and no "middle-men" taking money from your earnings. For example, the 4 week treasury bill that was sold today yields 4.456% with no state or local taxes due. (Compared to Vanguard's Prime Money Market Fund (4.29% today), that yield is 3.9% higher without considering the state and local tax advantage). In Virginia, depending on your effective state tax rate, today's auction results could be equivalent to a 4.7% yield while tying up your money for only 28 days! In higher-tax places like California and New York, the equivalent yields are even higher. Here's how it works. Set up automatic purchases to occur every Tuesday (that's when the 4 week treasury bills are auctioned) from your checking account. When the auction is completed, the Treasury Department will draft your checking account for the amount due. For example, in today's auction, for every $1,000 purchased, the Treasury Department will deduct $996.59. Twenty-eight days from now, they will deposit $1,000 back into your account. All you have to do is to make sure that enough money is in the checking account to cover the draft for the completed auction. Of course, each time, the Treasury Department puts back into your account more money than they took out, so over time, the amount of money you have available for the purchase of new treasury bills gets larger. The magic of compounding works for you once again. And this time, excludes the tax-bite from state and local governments.
Still holding strong at 4.8+ percent. Savings accounts can now be had at 5 and 5.12% from what I've seen, so it really boils down to your tax brackets when it's this close.