What you need to open a Vanguard high yield savings account

Vanguard offers a high yield savings account called the Vanguard Cash Reserve Federal Money Market Fund (VMFXX), which holds your money in a money market fund rather than a traditional bank deposit account. To open one, you need to be a Vanguard brokerage customer first — Vanguard does not offer standalone savings accounts outside its brokerage platform.

The actual steps are: open a Vanguard brokerage account online or by phone, fund it with an initial deposit (Vanguard's minimum is $0 for most accounts, though some funds have minimums), then transfer money into the money market fund from your bank account or existing Vanguard holdings. The whole process takes 5 to 10 minutes online, though your bank transfer may take 1 to 3 business days to clear.

You will need a Social Security number, a valid government ID, your date of birth, and a bank account to link for deposits. Vanguard will verify your identity during signup and may ask for additional documentation if your application flags for review.

Key Takeaways

  • Vanguard's high yield savings option is a money market fund (VMFXX) that sits inside a brokerage account, not a separate bank savings account.
  • You must open a Vanguard brokerage account first, which takes about 10 minutes online and requires your Social Security number and a valid ID.
  • The money market fund's yield changes daily based on market rates and Vanguard's fund expenses, so your APY is not fixed.
  • Money you deposit into the money market fund is not FDIC insured the way bank savings accounts are, though money market funds are generally considered very low-risk.
  • Withdrawals from the money market fund typically settle in 1 to 2 business days, not instantly like some bank savings accounts.

Opening your Vanguard brokerage account online

Go to vanguard.com and click "Open an account" or "get your free guide". Select "Brokerage account" from the account type menu. Vanguard will ask you to choose between a taxable brokerage account, an IRA, or a 401(k) rollover account — for a high yield savings account, choose the taxable brokerage account unless you want to use retirement funds.

Enter your name, date of birth, Social Security number, address, phone number, and email. Vanguard will run a background check and verify your identity using information from credit bureaus. This usually takes seconds, but if Vanguard cannot verify you automatically, it will ask you to upload a photo of your ID or answer security questions.

Next, link a bank account for your initial deposit. Vanguard accepts transfers from most U.S. banks. You can deposit as little as $1, though some investors prefer to start with $500 or more to make the money market fund's yield more meaningful. After you submit your bank details, Vanguard will send two small test deposits to your bank account (usually $0.01 and $0.02) within 1 to 2 business days. You will need to log back in and confirm those amounts to verify the account.

Finding and buying the Vanguard money market fund

Once your brokerage account is open and funded, log in to your Vanguard account. Click "Brokerage" or "Investments" and search for the ticker symbol VMFXX. This is the Vanguard Cash Reserve Federal Money Market Fund, which holds short-term U.S. Treasury securities and other very safe, liquid investments.

Click on VMFXX and select "Buy". Enter the dollar amount you want to invest — you can buy fractional shares, so you can invest any amount, even $10. Vanguard will show you the current share price and the fund's current yield. Review the fund's expense ratio (currently around 0.16% annually) and confirm your purchase.

The order will settle overnight or within one business day. Your money is now in the money market fund and earning the current yield. You can check your balance and the fund's performance anytime by logging into your Vanguard account.

Understanding the yield and how it changes

The Vanguard Cash Reserve Federal Money Market Fund's yield is not fixed. It changes daily based on the interest rates Vanguard earns on the Treasury bills and other short-term securities it holds, minus the fund's operating expenses. When the Federal Reserve raises interest rates, the fund's yield typically rises within days or weeks. When rates fall, the yield falls too.

Vanguard publishes the fund's current yield on its website and in your account dashboard. The yield you see today may not be the yield you earn next month. This is different from a bank savings account, where the APY is often locked in for a set period. Money market funds are designed to track short-term interest rates, so they move with the market.

You can see the fund's historical yield by visiting the VMFXX fund page on Vanguard's website. This shows you what the yield has been over the past month, quarter, and year, which can help you understand how it has moved with interest rate changes.

Moving money in and out of your money market fund

To add more money to your money market fund, log into your Vanguard account, go to "Deposit funds", and link another bank account or transfer from an existing Vanguard account. Bank transfers typically take 1 to 3 business days. You can also move money between your brokerage account and the money market fund instantly if you already have cash sitting in your Vanguard account.

To withdraw money, click "Sell" next to your VMFXX holdings and enter the dollar amount or number of shares you want to sell. The sale settles in 1 to 2 business days, and the cash lands back in your Vanguard account. From there, you can transfer it to your bank account, which takes another 1 to 3 business days. Total time from selling to having money in your bank: 2 to 5 business days.

Vanguard does not charge a transaction fee to buy or sell the money market fund. You pay only the fund's expense ratio, which is deducted from the yield automatically.

FDIC insurance and risk considerations

Money in a Vanguard money market fund is not FDIC insured. FDIC insurance covers bank deposits up to $250,000 per account holder per bank. Money market funds are not bank deposits — they are mutual funds that invest in short-term securities issued by the U.S. government and other borrowers.

However, the Vanguard Cash Reserve Federal Money Market Fund invests only in U.S. Treasury bills and repurchase agreements backed by Treasury securities, which are backed by the full faith and credit of the U.S. government. The fund has never lost money, and the risk of it doing so is extremely low. The main risk is that if interest rates fall sharply, your yield will fall with them.

If you need FDIC insurance, you should use a bank savings account or money market account instead. Many online banks offer high yield savings accounts with FDIC insurance and yields that are competitive with or higher than Vanguard's money market fund.

Tax reporting and account maintenance

Interest earned in your Vanguard money market fund is taxable income. Vanguard will send you a Form 1099-DIV each January showing the interest you earned in the previous year. You report this on your tax return as dividend income (even though it is technically interest). If you earned more than $10 in interest, Vanguard will mail the form; if less, you can download it from your account.

You do not need to do anything to maintain your account. Vanguard will keep your money in the fund, reinvest the interest automatically, and update your yield daily. If you move away or change your address, update your information in your Vanguard account settings so Vanguard can reach you if needed.

If you want to close your account, sell all your shares in the money market fund, transfer the cash to your bank, and then contact Vanguard to close the brokerage account. Vanguard does not charge a fee to close an account.

Frequently Asked Questions

Can I set up automatic transfers to my money market fund?

Vanguard does not offer automatic recurring transfers to specific funds. You can set up a one-time bank transfer or link your bank account and transfer money manually whenever you want. Some investors use their bank's bill-pay feature to send money to their Vanguard account on a schedule.

What is the difference between Vanguard's money market fund and a bank savings account?

A bank savings account is FDIC insured up to $250,000 and typically offers a fixed APY for a set period. Vanguard's money market fund is not FDIC insured but invests in Treasury securities, and its yield changes daily with interest rates. Withdrawals from a bank account are usually instant; from a money market fund, they take 1 to 2 business days to settle.

Do I have to keep a minimum balance in the money market fund?

Vanguard's money market fund has no minimum balance requirement. You can hold as little as $1 or as much as you want. However, the fund's yield is more meaningful if you have at least a few hundred dollars invested, since the interest earned on small amounts is minimal.

Can I use this account for my emergency fund?

Yes, many people use money market funds for emergency savings because the yield is competitive and the money is accessible within a few business days. The main drawback is that withdrawals take 1 to 2 days to settle, so it is not as instant as a bank savings account. If you need money within hours, a bank savings account is a better choice.

What happens to my money if Vanguard goes out of business?

Vanguard is one of the largest investment firms in the world and is unlikely to fail. If it did, your money market fund shares would be held in your name and protected separately from Vanguard's assets. The Securities Investor Protection Corporation (SIPC) insures brokerage accounts up to $500,000 per customer, which covers your money market fund holdings.