If you put your money in a savings account, the bank or other financial institution is technically borrowing it from you. In return, the financial institution will pay you interest. You can save your money in a variety of accounts and earn a range of interest rates. Learn more about the best places to save money so you can earn interest and achieve your savings goals.
High-Yield Savings Account
A high-yield savings account is a type of deposit account that offers a higher interest rate than traditional savings accounts you might find at traditional banks. Typically offered by credit unions and online banks, a high-yield savings account will pay you several times the national average for savings accounts.
Interest-Bearing Checking Accounts
An interest-bearing checking account is a checking account that earns an annual percentage yield (APY). It functions like a traditional checking account and allows you to deposit money via direct deposit, wire transfer, or ATMs. To withdraw money, you can use your debit card, write a check, or transfer funds between accounts.
Money Market Accounts
Money market accounts are similar to savings accounts but also offer checking account features. These accounts are available through banks, credit unions, and online lenders and are typically interest-bearing accounts insured up to $250,000. You might benefit from them if you want to save your money while also having the option to access it at any time.
Certificates of Deposit (CDs)
A certificate of deposit is a way to save money at a higher interest rate than a savings account. They come with a fixed term and a fixed withdrawal date, known as the maturity date. When you open a CD, you lock your money away for a period ranging from three months to five years or more. While you won’t have to pay monthly fees, there is a penalty for early withdrawal if you access your money before the maturity date. CDs are federally insured up to $250,000.
U.S. Savings Bonds
Offered by the U.S. Department of the Treasury, U.S. savings bonds are considered one of the least risky investments. You can purchase them online from TreasuryDirect or in paper form with tax benefits when you file your annual tax return.
Riskier Options Can Earn Higher Interest
If you have a high risk tolerance, your best options may be riskier investments like high-yield stocks and real estate investment trusts (REITs). However, the aforementioned options are less risky and more predictable. If you decide to invest in higher-risk products, you’ll need to do more research and know what you’ll do if things don’t go well.
Frequently Asked Questions
Where is the best place to save money for splurging? If you want to set aside money for splurging on impulse purchases, your priorities should be capital preservation and liquidity. Savings accounts—whether traditional or high-yield—are likely your best options to ensure you have the funds available when you want to spend.
Where is the most tax-efficient place to save money? Savings bonds are the most tax-efficient place to save money. Federal bonds are generally exempt from state and local taxes. Municipal bonds may be exempt from taxes at all levels, but they generally aren’t considered as safe as federal bonds.
Source: https://www.thebalancemoney.com/where-to-keep-your-savings-1289904
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