Introduction
Congratulations on saving a significant amount of money! Don’t mention how much you managed to save, but at the very least, you’ll want to set aside at least three to six months of your expenses in an emergency fund (six months or more is preferable).
High-Yield Savings Account
Next, you can increase the interest on the rest of your savings by taking advantage of a high-yield savings account. This is a savings account that offers a higher interest rate than your regular savings account – known as the annual percentage yield (APY) – and is typically offered by online banks only. While you may not want to transfer all your money to such an account (you might need the financial services your current bank provides), it’s something to consider.
Money Market Account
You can also put your money into a money market account, which is a mix between a savings account and a checking account that offers you a higher interest rate. However, money market accounts are not as flexible as your regular checking account. There are limits on the number of payments and withdrawals you can make each month via check, electronic transfer, draft, or debit card.
Certificate of Deposit
A Certificate of Deposit (CD) is another low-risk way to earn interest. It is a type of savings account that pays you a fixed amount of interest at the end of a specified term, such as six months or one year. But the catch is that you won’t be able to touch your money (without penalty) until the term ends and the CD reaches its maturity date.
Investing
I understand how you feel when you say you’re confused and scared about investing, but you’re writing that you want to earn a “significant amount” of interest on your money, and investing is truly the best way to do that. Investing doesn’t have to be complicated; there are less risky and easier types of investments you can explore as a beginner.
Although I generally suggest new investors to invest in ETFs (Exchange-Traded Funds) or index funds, it seems both are out of your comfort zone. It sounds like you would be a “conservative” investor – wanting low-risk investments that can outpace inflation. Fortunately for you, there are many investments to choose from. Bond funds and balanced funds could be good options. Just remember: “low risk” does not mean “no risk” and you might want to seek additional advice from a financial advisor.
I also want to emphasize that with this low risk, you will also face low rewards. If you want to build a significant amount of interest to help grow your money, you’ll need to branch out into other investments. Start small and increase your investments over time.
Good luck!
– Kristen
If you have questions about money, Kristen is here to help. Submit an anonymous question, and she may answer it in a future article.
Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts in our articles. Read our editorial process to learn more about how we fact-check and maintain the accuracy, reliability, and quality of our content.
– Washington State Department of Financial Institutions. “Saving for Emergencies.”
– Consumer Financial Protection Bureau. “What is a Money Market Account?”
– Investor.gov. “How to Save and Invest.”
Source: https://www.thebalancemoney.com/how-to-earn-more-interest-on-savings-without-investing-5219531
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