Getting your money to work for you doesn’t necessarily require investing in risky investments such as stocks. In fact you can earn interest on your savings without the prospect of losing your hard-earned cash. But your money can earn you even more if you know the right places to put it.
Depositing cash in a high-yield savings account, taking advantage of a bank bonus and opening a certificate of deposit (CD) account are tried and true ways of earning interest — but there are other savings options to consider.
A high-yield savings account should be opened. With a high-yield savings account, you can earn 2% or more instead of the meager interest rates of 0.13% offered by typical savings accounts (compound interest grows more quickly the greater the annual percentage yield, or APY). High-yield savings accounts are available from banks like Bask Bank, Tab Bank, and UFB Direct, all of which pay over 2.6% interest. Major online banks including Capital One, So Fi, and Discover all provide accounts with 2% APYs. Make careful to look around your neighborhood since your neighborhood bank or credit union may offer high-yield savings accounts with greater APYs.
Establish a money market account.
A money market account, also known as a money market deposit account, combines the features and advantages of both a checking and a savings account into one. You have access to a debit card for withdrawals in addition to checking privileges and a larger interest rate than you would receive from a high-yield savings account. Money market accounts, also known as MMAs, let account holders earn interest on their balance, making them ideal for shorter-term financial goals. The interest rate on a money market account tends to be variable and subject to fluctuation, rising or declining depending on market circumstances, even though it may be higher than on a standard savings or checking account. Interest rates on higher-yielding money market accounts range.
Make a certificate of deposit public.
A high-yield savings account known as a certificate of deposit, or CD, locks in your money for a predetermined period of time, typically between six months and five years. You are unable to access your money after making the first deposit until the CD period has passed. The CD offers a greater interest rate than either a money market account or a savings account as compensation for locking your assets for a predetermined period of time. Generally speaking, your yield increases with term length. For instance, the highest earning five-year CD rates provide APYs between 3% and 4%.
Create a CD ladder.
Opening multiple CDs with various terms allows you to access some of your money sooner while still earning the best APY possible for longer-term accounts. This is known as a CD ladder.
Consider the scenario when you have $2,500 to put toward a five-year CD. A laddered technique would divide your funds among several CDs as opposed to placing all of them in one CD. You may invest $500 apiece in a one-year CD paying 0.65%, a two-year CD paying 0.80%, a three-year CD paying 0.95%, a four-year CD paying 1.05%, and a five-year CD paying 1.2%. You can use those funds to put money into a new investment when the one-year CD’s terms expire.
Look for a bank bonus
You don’t have to devote the rest of your life to a single savings account from a single bank. Find a financial institution that provides a sign-up bonus for new clients if you have multiple savings objectives and open a different account for each of them.
To entice new customers to create an account, many traditional banks, credit unions, and online-only organizations provide bank incentives. Typically, there are stringent requirements, such making a minimum deposit or keeping a certain amount in your account for a few weeks or months. Additionally, some banks won’t give you a prize until after a year has passed. If you check, you might discover more profitable bonuses.
Investigate rewards checking accounts.
For creating an account and upholding a set of minimal conditions, rewards checking accounts offer benefits. Cash bonuses, cash back (similar to a credit card), or increased APYs comparable to high-yield savings account rates are all possible rewards. A rewards checking account might have a few additional requirements than a money market or high-yield savings account, but it might be more valuable than other savings options.
Think about purchasing I-bonds.
Savings bonds known as “I-bonds” accrue interest depending on both an inflation rate and a fixed rate. Savings bonds from the Series I are now yielding 9.62% interest. I-bonds can be purchased for as little as $25 and as much as $10,000 every year, and they can be held for up to 30 years. I-bonds can be redeemed after a year, but if you do so before five years, you will forfeit three months’ interest. Compared to a short-term money market account, this sort of account is suitable for investors who plan to save for the very long term.
Two times a year, beginning in May and November, interest rates fluctuate. In order to secure an interest rate of up to 10%, you must:
How to determine which account is right for you
Here are a few factors to consider when finding the right high-yielding savings account:
- Cash on hand. A little goes a long way but a lot goes even further. If you have a large lump sum, you might want to deposit it in a high-yield savings account or start a CD ladder. If, however, you have $100, you might consider buying an I-bond.
- Access to funds. If you want to withdraw your money at any time, you might want a high-yield savings account or money market account instead of the five-year CD, which imposes penalties if you withdraw it before the end of the term.
- Your goals and needs. Your financial needs should determine the type of account you’ll open. If, for example, you’re saving for the down payment for a house, you’ll want to consider a longer-term account that will pay higher interest over a longer time period than, say, a shorter-term money market account that could be used to save for a vacation overseas.
Find a financial organization that values its customers by offering simple mobile apps and straightforward sign-up processes, such as a bank. Additionally, look into different alternatives and financial organizations, such as neighborhood banks and credit unions, for potentially better rates and lower costs.
