Whether the extra money came as a job bonus, proceeds made from an investment like selling your house, or any other source, saving allows you to grow your savings and attain your goals.
The big question is where to save this money. Keeping money in your pocket is tempting to use and will have you exhaust it in a flash.
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It is definite that you would want proceeds from your investment; however, that should not be a priority. The first thought should be where the safest place to keep your money is. With security should come high probabilities of liquidity and a low cost of investment.
High return is a factor but should not be your first consideration. It would not be wise to focus on high yield and lose your money in the process.
Ideas on how to save your money
There are several safe places you can save your extra money, as elaborated in the article.
Checking account
This account is one of the most secure places to keep your cash. The account ought to be from an insured credit union or a bank. It, however, might not be the most reliable place you can save.
A checking account is mainly for putting income at your disposal; that is the money you use for your expenses on a daily basis.
This account has high liquidity and privileges like writing cheques, debit cards, and ATM access. You can withdraw your deposit at any time with no risk to your principal amount.
Though uncommon, some of these accounts guarantee high profits. Nevertheless, do not rely on these checking accounts as your primary place for saving.
Maintaining the least required balance, using your debit card on a regular basis in a month, or making a direct deposit will earn you a fee waiver.
Money market account
If you are looking for a safe place to save your cash that offers higher proceeds than a traditional checking account, you can consider having opening this account.
These look like savings accounts but offer higher interest rates. This account’s downside is that they offer a limited number of debit cards and check transactions in a month.
Money market accounts provide easy access to your money. If your banking institution is federally insured, you can trust your money is safe.
The majority of credit unions and banks are generally insured by the National Credit Union Share Insurance Fund or the Federal Deposit Insurance Corporation. This assures depositors protection of their money for a deposit of up to $250,000 in every banking institution.
If you don’t want to hold your money for long in a Certificate of Deposit account, a money market account would be a good alternative.
The account provides a minimum deposit requirement to open an account or get a better deal of the annual percentage yield (APY). Ensure you ask about all fees you would incur, for example, the monthly maintenance fees and any available penalties.
High-yield savings account
This type of saving account is a suitable choice for one who wishes to build their savings while having easy access to their cash whenever. In terms of yield, the highest paying high-yield savings account offers an interest of one percent.
This type of savings account is best for building your emergency fund or even saving for a certain course like a vacation or home repairs. Furthermore, this account assures liquidity and safety.
You can access your money if you would wish to. However, the Federal Reserve requirements on bank reserves provide restrictions that limit withdrawals or transfers to 6 times a month. Due to the coronavirus crisis, the rule has not been functional.
Additionally, the account offers an interest rate bonus if your account has a balance of at least five thousand dollars or ten thousand dollars. This also provides you an opportunity to get a higher rate for your savings.
Certificate of deposit
Unlike a savings account, this type of account holds your cash for a specified period. Withdrawing cash before the term expires will have you charged a penalty.
This account is also unfavorable when the interest rates are high due to the fixed interest rate. Nevertheless, they can be advantageous when the interest rates fall. It is better to save your money in a flexible online savings account than opening a long-term CD account.
To grow your money from a CD account, you can open different Certificate of Deposit accounts that mature at different times, a strategy known as CDladdering. This technique provides flexibility and is less risky than a single account with only one mature date.
Opening a number of short and long-term Certificate of Deposit accounts helps you gain high interest rates with minimal risk. In the future, you will also have an opportunity to benefit from higher interest rates.
Treasury bills
The majority of Certificate of Deposit Accounts, checking and savings account have insurance of a deposit of up to $250,000, which is a key benefit.
Nevertheless, if you want to deposit more than $250,000, you can consider looking at the U.S.Treasury bills or federal T-bills. These are short-term debt commitments by the state that have a maturity of one year or even less.
The accounts are totally liquid and affordable to buy and sell if you work with a reliable company.
For T-bills, you can purchase the monthly secondary market, for instance, via an investment bank, a broker, or from the Treasury Direct site during auctions. Investors buy the Treasury Bills cheaper than the face value.
Treasury bills are debts by the government; hence it is impossible to lose your investment. These bills guarantee a higher safety of your money than any other platform.
Start saving for a raining day today
Making a decision on where to keep that extra cash relies on your financial plan. If you have trouble making financial decisions, consult a financial advisor.
This expert will help you draw out a workable plan and strategy to save your extra money.