Where to keep your accumulated cash or earnings is a topic that frequently comes up for discussion in my social circle. Whether professionals or entrepreneurs, many who accumulates a healthy amount of wealth over time are constantly in pursuit of the best avenue that gives them the most return on their invested capital with the least possible risk.
After all, when you reach a certain level financially, it is about making your money work hard for you instead of the other way around. At the same time, you want to minimize your risk to preserve your hard earned money.
I will provide my thoughts on this topic in a future post, as well as some of the avenues where I park my cash and what I recommend for others. In this post however, our guest reader has provided 4 common avenues where you can park your cash for “better than average” returns. Enjoy…
If you are sitting on some cash, you’re probably pretty disappointed when economic times are not so good. In good economic times you could realistically earn over 3% on your money by keeping it in a savings account.
But in down cycles, with CD interest rates so low, and when the Federal Reserve signals that rates will remain low for the foreseeable future, what are you supposed to do with your money?
Here are some easy things that you can do to boost your savings a bit. It won’t be much, but every little bit helps!
Most people opt to keep their savings in a traditional savings account. However, many of these accounts don’t earn much interest when the economy is slow.
If you want to maintain a savings account to have easy access to your money, you should look at online banks that potentially offer higher yields. These banks typically offer about 0.50% more interest than brick and mortar banks.
Money market funds are another way that you can go to save your money and earn a little bit more than a bank account. Unlike a savings account, these are investment funds that are designed to preserve your money, while earning you a higher interest rate.
They typically have rates around 1-1.5%, which is much more than the average savings account. Plus, many of these funds are still FDIC insured, which means that you can’t lose money by putting your cash in them.
If you’re okay tying up your money for a period of time, you can earn higher returns by stashing your money in a CD, or certificate of deposit. CD interest rates at banks like Discover Bank offer good returns for a minor delay in accessing your funds.
For example, if you get a 12 month CD, you would earn 1%, which is better than the average savings account, which is right around 0.50% right now. If you know you’re not going to need the money, this can be a great way to save.
Finally, you can always invest the money in bonds. However, bonds can and do lose value, so you need to realize that this is more like an investment than a savings option.
To keep your money safe, you should invest in high quality government bonds, and you can earn a fair interest rate by doing so. This is the lowest yielding option, but it does offer an alternative to regular savings accounts.
What are some of your favorite avenues to park your cash in?