With the average deposit yield stuck at around 0.06% and inflation at a 40-year high of 8.5%, saving isn’t exactly the right word to describe what you’re doing with your money when you put it in the bank in the current economic climate. If you’re looking for an alternative way to grow your money, you could always invest it — but that comes with a level of risk that your emergency fund might not be able to tolerate.
The good news is that savings accounts aren’t the only game in town when it comes to safe, insured, interest-bearing places to stash your cash. In fact, there are options that you might not know about that pay higher yields and offer more convenience than savings accounts without any more risk to the money you’re trying to grow.
If you want all the familiarity of a bank — checking and savings accounts, debit cards, online banking, mobile apps and all the rest — but with better rates and kinder customer service, ditch your big bank and give your local credit union a chance.
Credit unions are member-owned non-profits — when you make a deposit, you’re buying a stake in the institution. With no hungry shareholder mouths to feed, credit unions are known for offering higher yields on deposits and better rates on loans than banks.
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Certificates of Deposit
Certificates of deposit (CDs) are a type of savings vehicle that holds a predetermined amount of money for a predetermined period of time. Unlike regular savings accounts, you can’t withdraw your money until the CD matures, which might be after a term of six months, a year or five years.
The longer the term, the higher the yield you’ll earn, and when the CD matures, you can take back your cash plus the interest you gained. The catch is that you’ll be hit with a penalty if you withdraw your money before the term expires. They’re safe investments — the risk is that inflation will outpace your yield, which can reduce or even eliminate your real returns.
Money Market Accounts
Don’t let the name mislead you — money market accounts are completely unrelated to the stock market, although they can be an excellent investment. Since they’re FDIC-insured, money market accounts are just as safe as standard savings accounts, but they often pay higher yields and come with more features and flexibility, like check-writing and debit cards.
Unlike CDs, you can access your money at any time without incurring a penalty, but the tradeoff is that money market accounts generally require a higher minimum deposit.
Cash Management Accounts
You usually won’t find cash management accounts (CMAs) at your bank or credit union. According to Forbes, they’re mostly offered by entities like robo-advisors, online brokerages and mobile trading apps. They’re coveted mostly for the convenience they provide.
As the name implies, CMAs help you manage your money, make payments, and invest your cash all in one place — many CMAs combine the features of both savings and checking accounts. They tend to pay higher yields than savings accounts and they don’t generally charge fees, but they often require higher minimum deposits than a standard bank account.
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