Saving money is an essential part of building a solid financial foundation. However, finding a place to stash that cash where it can earn a strong return is often a challenge. Interest rates on traditional savings accounts aren’t much to write home about, and keeping your money in a checking account earns practically nothing.
Luckily, there are several ways to get a better return on your savings, including internet banks, certificate of deposit (CD), Treasury bills, and Roth IRA. this post, we’ll dive into each of these options and how they could work for you.
1. Internet Banks
In recent years, internet banks have become increasingly popular, offering higher-than-average interest rates on savings accounts. The reason they can afford to offer such attractive rates is because they don’t have to pay for the overhead costs of brick-and-mortar branches. If you’re not familiar with them, these banks operate entirely online, which means you can open an account from anywhere you have an internet connection. The best part is that you can get started with very little financial commitment. Many internet banks allow you to open an account with as little as $1.
2. Certificate of Deposit (CD)
Another way to get a better return on your savings is to invest in a certificate of deposit (CD). A CD is a type of savings product that locks in a set interest rate for a specific amount of time. The longer the term, the higher the interest rate. CDs typically have terms ranging from three months to five years, and you can choose the one that fits your financial goals. Keep in mind that if you need to withdraw your money before the end of the term, you will likely have to pay a penalty.
3. Treasury Bills
Treasury bills are short-term debt securities issued by the U.S. Treasury. They’re backed by the full faith and credit of the U.S. government, which means they’re considered to be risk-free investments. Treasury bills are sold at a discount, and when they mature, you will receive the full face value. The difference between the purchase price and the face value is the interest that you earn. Treasury bills are available with terms ranging from a few weeks to a year, making them a great option if you’re looking for a short-term investment.
4. Roth IRA
A Roth IRA is a retirement savings account that offers tax-free growth on your investments. Unlike traditional IRAs or 401(k)s, Roth IRAs are funded with after-tax dollars, which means you won’t have to pay taxes on the money you withdraw in retirement. Roth IRAs also offer more flexibility than traditional retirement accounts. You can withdraw your contributions at any time without penalty, and you won’t have to start taking required minimum distributions at age 72 as you would with a traditional IRA.
As you can see, there are several ways to get a better return on your savings. Whether you prefer the ease and accessibility of internet banking, the guaranteed rates of CDs, the safety of Treasury bills, or the tax-free growth of a Roth IRA, there’s an option that can fit your financial goals. Consider each of these options and determine which one aligns best with your financial plans. By doing so, you’ll be putting your money to work and growing your savings for the future.
The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. Please consult your certified financial advisor.