5 smart ways to manage your cash during volatile markets

The recent stock market volatility is a good reminder that not all of your money should be invested in stocks. Money for an emergency fund or for short-term goals should be kept in a safe and stable place, such as federally-insured deposit accounts.

During the years when the Federal Reserve kept rates to near zero, many chose to settle for deposit accounts with zero interest, but after nine Federal Reserve rate hikes, there's no reason to settle for zero interest. There are now many options to earn 2% to 4% yields on federally-insured deposit accounts. Here are five ways to manage your cash to earn higher yields.

1. Open a reward checking account for high yield and liquidity

One little known option for a high-yield deposit account is the reward checking account. This type of checking account offers yields as high as 3% to 5%. More than 1,000 banks and credit unions across the nation offer high-yield reward checking accounts, and many have been around for more than 10 years.

Reward checking accounts have monthly activity requirements which must be met to qualify for the high yield. Requirements typically include using the debit card for 10 to 15 purchases per month and accepting only electronic statements. The large majority of reward checking accounts are free checking accounts with no monthly maintenance fee regardless of meeting the monthly requirements. An important feature to note is that the high yield only applies to some maximum balance which ranges from $5,000 to $50,000. Balances above this maximum earn a much smaller rate.

2. Link an internet savings account to your reward checking

If you have a large savings balance that exceeds the maximum balance of a reward checking account, an internet savings account can be useful to earn a high rate on savings that exceed the reward checking maximum balance. Internet savings accounts can easily be linked to any checking account which allows funds to be transferred back and forth. Unlike most brick-and-mortar savings accounts, internet savings account rates have risen inline with the Fed's federal funds rate, which is currently a range of 2.25% to 2.5%.

3. Earn higher interest rates with CDs that have mild early withdrawal penalties

CDs typically offer the highest yields for deposit accounts. However, a CD requires that you lock up your money for a period of time. If you need the money before the CD matures, you'll have to pay an early withdrawal penalty. This makes a CD less liquid than checking and savings accounts, but this reduced liquidity can be eased somewhat by choosing CDs with mild early withdrawal penalties. Look for CDs with early withdrawal penalties that are no more than six months of interest for 5-year terms and no more than three months of interest for 1-year terms. When the early withdrawal penalty is mild, you can sometimes earn more in a 5-year CD closed early than if you had kept the money in a savings account.

4. Look for CDs at both internet banks and credit unions

The best rates on CDs are often at credit unions rather than at internet banks. These include both credit unions in your local area and credit unions that are outside your state. Over the last several years, credit unions have been expanding their fields of membership. Today, it's likely that you are eligible to join more than a 100 local and out-of-state credit unions.

5. Choose the right mix of deposit accounts

To maximize the interest that you earn on deposit accounts, choose the right mix of reward checking accounts, online savings accounts and CDs. In addition to maximizing interest, you have to factor in time horizons for saving plus your desired level of effort. For those who prefer to keep things simple, just one reward checking account or one internet savings account may be the best approach. For those with large savings amounts and who don't mind managing a few accounts, it might make sense to have a reward checking account, a savings account and multiple CDs.

The bottom line here: It can pay to smarten up your cash management. When talking about investing, it's often said that higher yield requires more risk. When talking about deposit accounts, however, you can have higher yields without more risk. Obtaining higher yields just takes smarter cash management.

Ken Tumin is founder and editor of DepositAccounts.com, which has been tracking and rating the savings, CD and checking account offerings of banks and credit unions for more than a decade.