Where to Put Your Money: How to Earn the Most on Your Savings

May, 17 2020

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Thinkflow Team
Written By
Thinkflow Team

Saving money for your future or a rainy day is important, but how do you know where to put your money in order to get the biggest and best return?


From high-yield savings accounts to CDs and bonds, there are lots of options available to choose from.

Here are the best places to put your money, depending on your goals and needs.

High-Interest Savings Accounts

While standard banks offer low interest rates on savings, there are plenty of online-only banks offering much higher rates. If you want a low-risk place to put your money, this option is worth considering.

 

When you choose a high-interest savings account, your money will grow as long as you keep your money there. While interest rates can fluctuate depending on the market, they're still a safe bet.

 

Shop around to find out which banks are currently offering the highest annual percentage yield (APY) rates. Then determine how much money you want to leave there. Sit back and watch your savings grow each month.

 

One benefit of saving your money in an online-only account is that it's accessible whenever you need it, but not too accessible that you’ll feel tempted to withdraw it. So, if you have an emergency, like your car breaking down or losing your job, you can use the cash to stay afloat and keep your bills paid.

The average interest rate of savings accounts is around .07%. However, high-interest savings accounts can give you a higher rate that hovers around 1.70%.

Keep in mind that these rates can change, but the amount of money you have will never decrease (unless you withdraw from the account).

Make sure you read the fine print before you open a new savings account. Make sure there are no fees or minimums you need to maintain.

Consider CDs for Bigger Returns

If you want a higher return on your savings, a Certificate of Deposit (CD) is a good option. This savings vehicle is offered by almost every bank or credit union and is FDIC insured.

CDs tend to offer a higher interest rate than a high-yield savings account. The longer you let the money sit, the more your money will grow. 

Banks list their Certificate of Deposit rates online, so just like a savings account, you should shop around to find one with the highest yield. Many banks don't require you to be a member or have an account in order to get a Certificate of Deposit, but it's always wise to ask first.

The biggest downside to a CD is that you will have to leave the money there for a specific amount of time. If you take it out early, penalties apply and can come in the form of several month's worth of interest lost.

The maturity period for CDs can vary but typically last six months, one year, or five years. When you earn interest on the CD, it's added to your balance, and it's also added if you decide to renew the CD for a longer period of time.

Money Market Funds and Deposits

Money market funds are mutual funds that invest in low-risk securities. If you're looking for a decent return, this is an excellent option. In most cases, money market funds will give you a return higher than most savings accounts, but lower than riskier types of investments.

It's important to note money market funds may not be FDIC insured. Instead, money market funds are regulated by the Securities and Exchange Commission (SEC) Investment Company Act of 1940.

You can shop for a money market fund at many banks or brokerage firms. Keep in mind that interest rates are not guaranteed, so make sure you choose one that has a track record of performing well before you invest.

You may also consider money market deposit accounts. These accounts are offered through banks and require a minimum initial deposit and balance, and you'll also have a cap on the number of monthly transactions you can make.

Money market deposit accounts are FDIC insured, unlike some money market funds. Just make sure you keep your balance where it needs to be and avoid taking out money too often. The perk to this option is that the money is more accessible than a CD, and if rates are good, you stand to get a fairly decent return.

Saving Smart

Whether it's a high-interest savings account from an online bank, a CD or a money market-based fund, knowing where to put your money can make a big difference for your financial security and peace of mind. It's crucial to have savings set up in case of an emergency, regardless of the account type.

When you shop around for the best rates, you stand to earn more money on your savings in the long run. Continue to make deposits and let your hard-earned money grow so you'll have even more when you need it.

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