The information written below are for the purpose of information only, but it is not just a mere hearsay.
All the information has been carefully studied by group of people to help you select the best savings vehicles.
But if you are still unsure with the data, you can still consult a licensed financial planner.
Accounts for saving are not the same as what it was before. The 1980’s halcyon days are over when your traditional passbook accounts earns 6 percent of interest annually.
Today, rate is averaging to 3 percent. That is annual return considering getting $300 for your $10,000 savings.
By looking at the initial figures seems not that motivating for anyone of you here now reading this to save your money.
Obviously the rates on the savings interest are very low and that’s the reality in all over places. But, there are options that you can chose that might help you earn return on extra money.
1. Market accounts for your Money
A market account is basically similar to your traditional savings, except there are few limitations being added. It includes the
- minimum balance to maintain
- and maximum withdrawals each month.
As reward in meeting such standards given by financial institutions, you are entitled to get interest rate that is slightly little bit high. This is in accordance with the FDIC (Federal Deposit Insurance Corporation), as far as we know the rate is around 8 percent.
2. Funds in Market
A fund in market is a mutual type of funds, a short term personal investment with low risk of security, for example “Treasury Bills” in United States.
They are sold in the course of brokerage organizations and it is not insured by FDIC. You will get your monthly payout as dividend that is higher than the interest rate of regular savings.
3. Deposit Certificates
If you have extra money for you to set aside for a long period of time, it is best to consider doing deposit certificates. With this, the longer your money is deposited or based in a period, the higher rate you will have.
At present, the average rate for this is 1 percent, while 6 month deposit could get you 0.8 percent of interest rate.
Naturally, your money will not be accessible during the period when it was converted with certificate.
Most financial experts suggest creating your “Deposit Certificate Ladder” by acquiring multiple certificates on different dates of maturity.
This helps decrease the risk and will keep part of your cash flow.
4. Checking accounts with High yield interest
For the record, interest rate on checking accounts is lower than the interest rate offer on savings account. But there are some financial institutions that offer high interest rate for checking compared to your savings.
But before you can get the favorable interest rate, you are required to meet standards, like maintaining a certain balance, making minimum transactions with your account, and connecting your account to your paychecks in the process of direct deposit. The terms are worth options if it meets your habits.
This is sold by United States Treasury. The interest rates of these bonds are based on the inflation rate and recalculated twice annually.
Like your “certificate deposits”, this type of product is very much time sensitive, again you won’t have any access to your funds until such time that the terms in the bonds reaches its maturity date.
And also, I-bonds even earn interest for 30 years with a tax-exempt feature. The negative side for this is the rate of possible inflation.
This one is common today. A stock simply represents a company share.
Therefore, the performance of stock depends on companies performance in which you decide to invest. If companies become valuable, so as your stock, but if companies on the other side lose its value, you will also lose money.
The point here is, investing in stock market is risky, though there are high potential returns of the money you have invested compared to other vehicles.
The key to success is to look for a right stock broker that has a good track record and of course can be trusted.
One more thing, make sure to familiarize yourself in stock market before investing your money into it.
7. Roth IRA (Individual Retirement Vehicle)
This is your retirement savings, the money that you invest for IRA.
Basically this will not be available until your retirement date, normally at the age of 60. As being said, this type of long term investment can give you a nice return due to compounding interest rates per year with around 8 percent annual rate.
8. Personal Lending
If you aim for active approach with your save money, becoming a lender is an option for you through personal lending service.
But before doing it so, always remember that there are risks in this process, but it can be minimized if you know how to do thing the right way by screening your borrowers and thinking that you are giving just a portion as compared to their individual loan.
The idea is if your borrower takes $6,000 loan, your stake is around $50.
Your other investment is spread across loans, so in situations like one of your borrower’s failure to pay, losing your money is high. For the record the average return of this type of investment can be greater than 5-10 percent.
There are many places wherein you can place your hard earned money.
You can have it save on internet, your savings account, bonds or even the spaces on your cabinet and elsewhere you think that you money is safe and secure.
So whichever plan you have in mind, make sure that you know and understand carefully the possible risk involved.
If money is involved, creating a sound plan as a start will help you minimize possible problems in the future.
The eight alternatives that we have just shared is somewhat a guide for you to decide a better goal for your saving plan.