When you work hard for your money, it can be frustrating to see it sitting idle in the bank earning little to no interest.
Getting your money to work harder for you can sometimes be as simple as finding a different savings account.
In fact, getting your money to work harder for you can sometimes be as simple as finding a different type of checking or saving account.
If you’re willing to take some risk–for potentially higher rewards–you may also want to consider investing some of your money in order to help build wealth over the long term.
Read on for some simple ways you may be able to start earning more interest than a standard savings or checking account.
High-Interest Savings Accounts
Some banks offer special, high-interest or high-yield savings accounts that can offer higher rates than traditional savings accounts, yet still offer fairly easy access to your money.
Typically, these accounts limit you to six withdrawals or transfers per month per Federal Reserve requirements. While this rule is not currently being enforced due to the coronavirus pandemic, some banks will still charge a fee so be sure to check with your bank.
You may also want to look at high-interest savings offerings at online-only banks.
Because these institutions tend to have lower operating costs than brick-and-mortar banks, they often offer rates that are higher than traditional banks. They may also be less likely to charge monthly fees.
You may also want to keep your eyes open for high-yield savings accounts that offer a sign-up bonus or an interest rate bonus. These incentives can boost your earnings, though you may have to maintain a high minimum balance in the account to earn the higher rate.
A high-yield savings account can be a great place to build an emergency fund or save for a vacation or home repair while providing safety and liquidity.
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Rewards Checking Accounts
While checking accounts are traditionally used for storing money that you use everyday and to pay bills, rather than savings, some banks offer rewards checking accounts, which may offer higher interest rates than traditional checking and savings accounts.
However, there may be some restrictions. For instance, the balance that earns the elevated rate may be limited, and you may have to meet certain direct deposit or debit card transaction requirements each month to earn the higher rate.
Some banks also offer cash bonuses to customers who open new checking accounts. While this may also come with some requirements, such as setting up direct deposit and/or keeping your account open for a certain number of months to earn the bonus, it can be another good way to increase the income you earn on your bank deposits.
Like other checking accounts, rewards checking accounts are highly liquid and typically come with check-writing privileges, ATM access, and debit cards. Plus, deposits can be withdrawn at any time.
If you’re considering a rewards checking account, however, you may want to first make sure that the requirements to earn the elevated interest rate are easy for you to meet. Otherwise, you could potentially earn less interest than a standard savings account.
Credit unions, unlike banks, are owned by the people (or members) who hold accounts at the credit union. Because of this, these financial institutions work for the benefit of account holders instead of shareholders.
In some cases, that can translate into lower fees, better account perks, and higher interest rates. To join a credit union, you typically need to live or work in a certain geographic area or work for a certain employer.
If you have a credit union near you, you may want to check the rates it offers and see if you can get a good deal.
Money Market Accounts
A money market account is a type of deposit account that often requires a higher minimum balance to open than a standard savings account and typically earns a higher interest rate.
Some money market accounts also come with a debit card or checks (which you generally won’t find with savings accounts), but financial institutions may require that they not be used more than six times per month. Some will charge a fee if you go over that number.
If you are looking to earn more interest than a standard savings account without meeting the transaction requirements of a rewards checking account, money market accounts can be worth considering.
Before opening an account, however, it can be a good idea to ask about fees, such as monthly account fees and penalties.
Certificates of Deposit
Certificates of deposit (CDs) typically offer higher interest rates than traditional savings accounts in exchange for reduced withdrawal flexibility.
When you put money in a CD, you have to agree to leave the money in the account for a set period of time, known as the term. If you withdraw your deposit before the term expires, you’ll have to pay an early withdrawal penalty.
One benefit of CDs is that you lock in the interest rate when you open the CD. Even if market rates drop, you’ll keep earning the same rate. On the other hand, if rates rise, you’ll be stuck earning the lower rate until the CD matures.
One way to work around this is to open several CDs that mature at different times, a technique known as CD laddering. Having a mix of short- and long-term CDs allows you to take advantage of higher interest rates but still have the flexibility to take advantage of higher rates in the future.
A CD ladder also helps with the lack of liquidity that comes with CDs. With a CD ladder, you can take advantage of the higher rates that CDs may offer without tying up your entire savings balance for multiple years.
Other Ways to Make Your Money Work For You
If you’re planning to park your cash for at least five years or so, and you are willing to take some risk, you may want to consider investing your money in the market.
While an investment might generate a higher return, all investments come with the risk that you could lose some or all of your money.
You can better weather this risk by investing for the long term, which essentially means only investing savings that you would not likely need to touch when the market is down.
There are a variety of ways to start investing. If your employer offers a 401(k), that can be one of the easiest ways to start investing. Another option for retirement is an individual retirement account (IRA).
You could also open a brokerage account for financial goals outside of retirement. This is a taxed account, typically opened with a brokerage firm, that allows you to buy and sell investments like stocks, bonds, and mutual funds.
If you’re ready to start investing, you may want to speak with a qualified financial advisor who can help you establish your savings goals and risk tolerance and help you develop a personalized investment strategy.
If you’re looking to make more interest on your money, you may be able to increase returns by opening a high-yield account at a traditional bank, online bank, or credit union.
Other options that may pay more than you’re earning now include money market accounts and CDs.
Looking for Something Different?
You may also want to consider opening up a checking and savings account, such as SoFi Checking and Savings®.
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