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Like most cash management account providers, Betterment is not a bank. It’s an online financial service provider that helps customers invest their money. Betterment sweeps customers’ funds into accounts at program banks, where it benefits from FDIC insurance. Betterment has two complementary accounts, formerly known as Betterment Everyday: Betterment Cash Reserve and Betterment Checking.

Betterment says: “Betterment Cash Reserve (“Cash Reserve”) is offered by Betterment LLC. Clients of Betterment LLC participate in Cash Reserve through their brokerage account held at Betterment Securities. Neither Betterment LLC nor any of its affiliates is a bank. Through Cash Reserve, clients funds are deposited into one or more banks (“Program Banks”) where the funds earn a variable interest rate and are eligible for FDIC insurance. Cash Reserve provides Betterment clients with the opportunity to earn interest on cash intended to purchase securities through Betterment LLC and Betterment Securities. Cash Reserve should not be viewed as a long-term investment option.

Funds held in your brokerage accounts are not FDIC‐insured but are protected by SIPC. Funds in transit to or from Program Banks are generally not FDIC‐insured but are protected by SIPC, except when those funds are held in a sweep account following a deposit or prior to a withdrawal, at which time funds are eligible for FDIC insurance but are not protected by SIPC. See Betterment Client Agreements for further details. Funds deposited into Cash Reserve are eligible for up to $1,000,000.00 (or $2,000,000.00 for joint accounts) of FDIC insurance once the funds reach one or more Program Banks (up to $250,000 for each insurable capacity—e.g., individual or joint—at up to four Program Banks). Even if there are more than four Program Banks, clients will not necessarily have deposits allocated in a manner that will provide FDIC insurance above $1,000,000.00 (or $2,000,000.00 for joint accounts). The FDIC calculates the insurance limits based on all accounts held in the same insurable capacity at a bank, not just cash in Cash Reserve. If clients elect to exclude one or more Program Banks from receiving deposits the amount of FDIC insurance available through Cash Reserve may be lower. Clients are responsible for monitoring their total assets at each Program Bank, including existing deposits held at Program Banks outside of Cash Reserve, to ensure FDIC insurance limits are not exceeded, which could result in some funds being uninsured. For more information on FDIC insurance please visit Deposits held in Program Banks are not protected by SIPC. For more information see the full terms and conditions and Betterment LLCs Form ADV Part II.”

Betterment says: “”The annual percentage yield (“APY”) on the deposit balances in Betterment Cash Reserve (“Cash Reserve”) is 1.10% and represents the weighted average of the APY on deposit balances at the banks participating in Cash Reserve (the “Program Banks”) and is current as of May 11, 2022. This APY is variable and subject to change daily. Deposit balances are not allocated equally among the participating Program Banks. A minimum deposit of $10 is required, but there is no minimum balance required to be maintained. The APY available to a customer may be lower if that customer designates a bank or banks as ineligible to receive deposits. APY applies only to Cash Reserve and does not apply to checking accounts held through Betterment Checking. Cash Reserve and Betterment Checking are separate offerings and are not linked accounts.””

Cash reserves refer to the money a company or individual keeps on hand to meet short-term and emergency funding needs. Short-term investments that enable customers to quickly gain access to their money, often in exchange for a lower rate of return, can also be called cash reserves.

How To Build A Cash Reserve

How do cash reserves work?

Cash reserves work in slightly different ways, depending on the entity that owns them:

What is a cash reserve?

A cash reserve is a sum of money that an individual or organization saves and keeps available in case of a sudden short-term requirement. People and companies can use accumulated cash reserves as funds that they can instantly liquidate in order to make a quick and significant purchase. In most situations, cash reserves are best kept in a separate bank account from the ones you use for everyday expenditures, like the general business account or payroll account.

The amount of money within a cash reserve depends on each particular situation. Most business managers need to find a balance between an amount too small to cover the most probable unexpected expenses and one that is not too large to block funds that couldve been used to advance the business. As a general rule, both businesses and individuals should have cash reserves that can cover three to six months of expenses.

Setting up cash reserves

Withdrawing money from the companys cash reserve account is typically done through credit. At the same time, the account where the money goes—if its an internal one such as payroll or a general business account—is debited. On a financial statement, it would look something like this:

Advantages and disadvantages of cash reserves for companies

Some of the most often encountered situations where cash reserves are useful for an organization are:

Some of the most important disadvantages of having a cash reserve are:


What are the two types of cash reserves?

In general, there are three main types of cash reserves: operating, capital, and debt-related.

How much cash reserves should I have?

Most financial experts end up suggesting you need a cash stash equal to six months of expenses: If you need $5,000 to survive every month, save $30,000.

What is cash reserve with RBI?

All Scheduled Commercial Banks are at present required to maintain with Reserve Bank of India a Cash Reserve Ratio (CRR) of 5.00 per cent of the Net Demand and Time Liabilities (NDTL) (excluding liabilities subject to zero CRR prescriptions) under Section 42(1) of the Reserve Bank of India Act, 1934.

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