The Best Saving Accounts For Your Hard-Earned Cash
/Working and earning is not only about spending money but also about saving and growing your money. People save money for numerous reasons, like saving for a new apartment or buying a house, saving for retirement, or saving for the wedding. There are many places where you can put your savings so that you won’t be tempted to use it before it has a chance to accumulate.
Knowing what you will need your money for and when can help you select the best place to put your savings. You can put your savings in different savings accounts based on your short-term and long-term financial goals and personal needs. A traditional savings, or high-yield savings account, is the least risky where your savings will grow gradually with little or no associated risk.
If you are wondering what are the best places to put your savings, this article has got you covered.
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Traditional savings accounts
One of the best places to put your savings is a traditional savings account. Although interest rates of most traditional savings accounts are relatively low, a savings account offers an opportunity to grow your money without the risks associated with stocks or mutual funds.
You can open a savings account with your chosen bank or credit union at your local branch. A traditional savings account is insured by the Federal Deposit Insurance Corporation (FDIC). Although you cannot withdraw money from your savings account anytime you wish, you can access your money on very short notice.
Interest rates can vary based on the type of account you open and the bank you choose. Banks may offer higher rates to only savers who make a higher initial deposit and maintain a higher balance.
High-yield savings accounts
Online banks provide high-yield savings accounts. Like standard savings accounts, these accounts are also FDIC insured. These accounts offer higher interest rates than standard or traditional savings accounts. The reason a high-yield savings account provides a higher interest rate compared to a traditional savings account is because of one or two reasons.
The account requires a large initial deposit, and access to the account is limited.
The bank is online-only and does not have overhead costs related to maintaining branch locations. Personally, my high-yield savings account is with Ally. I have been with them for over five years and I love everything about them.
You will need to set up transfers from another bank to make deposits to your high-yield savings account or withdraw funds from this account. If you want to maximize your savings, a high-yield savings account may be the best place to put your savings.
Certificates of Deposit
If you want to earn a higher interest rate on your savings than a traditional savings account offer, then a certificate of deposit (CD) may be the best place to put your savings. Certificates of Deposit are insured by FDIC, and are similar to savings accounts. Traditional banks routinely offer certificates of deposit.
A CD offers a much higher interest rate than a traditional savings account, but your money in a CD is less accessible than your money in a savings account. You must keep your money in a CD for a specific period of time before you can withdraw it penalty-free.
You can access your money before the CD matures if you want to access the money in an emergency, but the bank will impose a penalty that could wipe out the interest you have earned. If you want to leave your savings alone, then a certificate of deposit can be the best place to put your savings.
You can purchase a CD for a specific period of time, from as short as 1 month to as long as 10 years. Generally, the longer the amount of time you select to leave your money on deposit, the more interest the bank will pay you. Banks may also offer a higher interest rate if you keep a large balance in a CD.
Money market funds
There are two different kinds of money market funds or accounts: money market savings accounts and money market mutual funds. If you want to earn more interest on your savings than other savings accounts offer, then a money market savings account can be the best place to put your savings without taking any risk with your savings.
Depending on the bank, these accounts may come with check-writing privileges or a debit card. Most banks usually offer money market savings accounts.
Money market mutual funds are offered by brokerage firms or investment companies. They are not FDIC insured. You can put your savings in a money market fund through a brokerage firm by creating a brokerage account or create an account with the investment company directly to put your savings in a market mutual fund.
Since your savings in the fund are invested in the market, there is a higher risk factor involved in a money market mutual fund compared to money market savings or high-yield savings accounts. While a money market fund may yield a higher interest rate than a money market savings account, you do not get to keep all those earnings as there
U.S. treasury bills and notes
U.S. Treasury bills or notes, often referred to as U.S. Treasuries are issued by the U.S. government and are backed by the full faith and credit of the U.S. government.
T-bills and notes are exempt from state and local taxes and are available in different maturity lengths. T-bills are sold at a discount with 20-year and 30-year maturities. T-bills pay interest every six months and when the bill matures, the government pays you its full face value. If you purchase a $1,000 bill for $990, it will be worth the full $1,000 when it matures.
T-notes can be purchased for different maturity terms - 2, 3, 5, 7, and 10 years. They earn a fixed rate of interest every six months. Also, if you purchase T-notes at a discount, they can be cashed in for the face value at maturity. You can stash away your money in Treasuries with as little as $100.
If you want to put your savings in a safe place, you cannot get a higher degree of safety than a T-bill or T-note.
Bonds
Bonds are a low-risk debt investment. Bonds are issued by governments, states, companies, and local authorities (e.g. municipalities) to fund projects. Bonds are issued for a specific period of time at a fixed interest rate.
When you purchase a bond, you are lending money to the issuer of the bond. In exchange for the loan, the bond issuer pays you interest for a specific period of time and returns the face value of the bond when it matures.
Investing in bonds involves varying degrees of risk, depending on the type of bond and/or the issuer of the bond. For example, you carry a risk if you purchase a corporate bond from a company and then that company goes bankrupt. On the other hand, investing your savings in government bonds is considered to be amongst the safest investments, as the securities are backed by the full faith and credit of the U.S. government.
How to select the best place to put your savings
It is important to choose a savings account that is right for your financial needs. If you want to access your savings instantly in the event you need it, then an interest-earning easy access savings account may be the best place to put your savings.
If you want to squirrel away your savings for safety, then a standard or traditional savings account may be the best place to put your savings. A money market savings account may be the best place to put your savings if you are looking for an easily accessible savings account to save money and earn interest.
A CD account may be the best place to put your savings for the intermediate-term. Both CDs and money market savings accounts are FDIC-insured so they are safe.
In conclusion
As you have seen, there are a variety of savings accounts to keep your savings. It is important to do your due diligence before you squirrel away your savings to a particular savings account so you can make the most of your savings.
