There are a lot of incredible things you can save about traditional banks, but good interest rates are not one of them. There is nothing wrong with using a run-of-the-mill savings account, but your money is going to be sitting there collecting dust.
If you’re going to be saving your money, why not find a place where it can get better returns.
When you’re trying to decide where to put your money, there are a couple of things you’ll need to consider.
First, how much interest are you going to earn. Obviously, you want to earn as much as possible. Even among banks, you’ll find different interest rates. You need to pick the institution and account with the highest returns.
You also need to think about the integrity and security of the place you are putting the money. You don’t want to put your cash anywhere shady or too risky. Sure, there are places which offer fantastic rates, but who knows if you’ll ever get your money back.
Lastly, you need to think about the liquidity of the money. How quickly can you get it if you need it?
CDs are one of the most traditional places to put your money. You’ll get better rates than a standard bank account, but you won’t have any additional risks.
Let’s explain CDs (no, we don’t mean the Guns N’ Roses cd that’s still riding around in your car). Certificate of deposits are simple.
You deposit your money and you agree to keep it there for a specific amount of time. The bank will reward you with the promise to leave it there with a higher interest rate.
CDs come in a variety of lengths, known as maturity dates. They can be anywhere from a couple of months to 5 years. The longer the maturity date, the better the rate. The average rate for a 5-year CD is slightly over 1.25%.
If you want to get the better rates, you’ll have to buy the longer CDs, which means you won’t be able to access your money for several years.
Money market accounts are very similar to a savings account, except you won’t have as simple access to your cash. With a savings account, you’ll probably get checks you can use.
With a money market, you’re only going to be allowed a certain number of transfers from the account, and usually the number is very low.
The benefit of money market accounts is the higher interest rates. Usually, they are much better than a traditional savings account.
One of the caveats of money market accounts is the higher minimum deposits. Most banks or credit unions have a minimum deposit you’ll have to meet if you want to open an account. This could be anywhere from $100 to thousands of dollars.
Okay, this one isn’t technically a different type of account, but it’s a different spin on a classic.
Today, people do everything online, even banking. There are a lot of banks which are opening up without the classic approach of a brick and mortar location. These banks are completely online.
Why does this matter to you? Because they are offering much better interest rates or any rates on checking accounts. Find an online bank, and you’re probably going to enjoy some higher interest rates.
Most people do all of their banking online from their phone. If you can skip going to a physical branch, why not make some more money?
Much like online checking, online savings is the way to go if you want access to your money, but you still want to enjoy a nice interest rate. There are some online banks that are offering rates traditional banks will never get to.
It’s not uncommon to see 1.60% or higher for these savings account. You won’t find anything close to this with a normal bank. Not only do they have higher rates, but they also tend to have fewer fees as well. It’s a win-win.
Okay, this type of account is VERY different from the others on our list, but it has to be included.
Peer-to-peer investing is creating waves in the investment community. Why’s that?Because it’s easy and the returns tend to be great.
If you haven’t started investing, you might be tempted to skip over this option, but it’s much easier than you can imagine.
Let’s look at sites like Lending Club for example. You can create an account in less than 10 minutes, and they can automatically connect with thousands of banks. They have made it as simple as possible for you to start investing your money.
How does Lending Club work? You set up your account, then you start browsing through all of the possible loan options you want to invest in. They give you a ton of information about the options, you pick the one you want, and then you invest some money into the loan. It can be as little as $25.
Skip The Boring Bank Accounts
You work hard for your money. It’s time you put it to work for you.
As you can see from these options above, it doesn’t take a genius to find the best option for the perfect interest rate.
Don’t put your money in some llama farm, find a safe place where you can watch your money grow.