The real paradox of thrift today

Vanguard this week announced changes to three of its money market funds: According to a press release on the company’s website, Admiral Treasury Money Market and Treasury Money Market will merge (the two funds have been closed to new investors since late January).

In addition, Vanguard said it would close Federal Money Market to new investors, as of the end of day, June 2.

The changes are an attempt to shore up yield. With short-term Treasury rates at deep lows–the 1-year T-Bill pays out less than 0.5% today-money funds can barely cover expenses.

By merging two funds, Vanguard can cut costs; by closing funds to new investors, managers can avoid buying more Treasurys at ever lower yields.

The sad state of cash returns won’t last forever. Still, I feel for anyone who relies on savings yields to help meet living costs. Though inflation was negative for the 12 months ending in April, some costs–like food–increased over the same time period. On top of the soaking we’ve all taken in the markets, today’s ultra low yields are just one of the bear’s many bitter aftershocks.

The only real recourse is to shop around. Vanguard is pointing investors to alternatives, such as Prime Money Market, now yielding 0.42%.

You can find a list of the highest yielding funds across the industry at For bank savings rates go to and

Take heart: High savings yields come with their own problems, like inflation. As Reagan makes the point in his first inaugural address–at a time when savings accounts paid double-digit rates–the rapid rise of prices can do just as much to “penalize thrift.”

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