5 Ways To Earn at Least 5% APY on Your Money in 2024 — Without Using the Stock Market
Written by
Ashley Donohoe
Edited by
Susan Kim
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Although the stock market can yield a 10% average annual return, you might prefer investment options with less uncertainty and a lower risk of losing money. During this time of competitive interest rates, you can find several safe investments with high returns, including bank accounts and government securities. Here are five ways you could get a 5% annual percentage yield on your cash in 2024.
1. Treasury Bills
Treasury bills are good short-term investments if you want a safe place to put your cash. Sold through brokerages and directly through TreasuryDirect auctions, they’re U.S. government securities with a very low default risk. The minimum investment amount is $100, and you can pick from term options between four and 52 weeks.
Per the U.S. Department of the Treasury, bills with terms of up to 26 weeks currently offer fixed yields above 5%. However, you won’t get periodic interest payments like with other options. Instead, you buy the Treasury bill at a discounted price and get the face value upon redemption.
2. Certificates of Deposit
CDs are special accounts made for depositing a specific amount of money for a certain number of months or years. This commitment can get you a better annual percentage yield than other types of bank accounts. You also normally get a fixed rate, which is beneficial if the Fed starts cutting rates after you open your account.
To get at least a 5% APY on a CD, check with credit unions or online financial institutions because they tend to be more competitive. Rates can also vary widely depending on the term you choose. Right now, the best APYs tend to be on CDs with terms of less than a couple of years.
These investments differ from other savings accounts since there’s usually a fee for withdrawing your savings early. If that concerns you, you can find liquid CDs that let you make penalty-free early withdrawals, though your APY may be below 5%. Additionally, note that CDs sometimes require a large minimum deposit.
3. High-Yield Savings Accounts
If you prefer something requiring less commitment, a high-yield savings could be a smart choice. It’s much like a regular savings account in that you can freely withdraw and deposit money, though certain transactions may have limits. Opening deposit amounts are often low, and you get an interest rate that varies.
You’ll most often find these through online financial institutions, including some currently offering at least a 5% APY. Just keep in mind that some accounts have monthly fees and that your variable APY could drop below 5% in 2024. You should also consider whether the online bank has options for withdrawing and depositing physical cash.
4. Money Market Accounts
A money market account can be more flexible than a high-yield savings account since you might get a checkbook and debit card. This is great if you want to make purchases or withdraw cash in person. Although these features may remind you of a checking account, banks often set monthly transaction limits like with typical savings accounts.
You can most often find money market accounts with a 5% APY through online financial institutions. Since interest tiers are common, banks may require a minimum balance of up to several thousand dollars to get the best money market account APY. Also, keep in mind the rate is variable and you may have to pay monthly account fees.
5. Series I Savings Bonds
Series I savings bonds are a government investment option that you can get through TreasuryDirect or request when you file your federal taxes and are due a refund. While the bonds have a 30-year term, you can cash them in after one year with a penalty or after five years without one. They’re unique since they feature an interest rate with both fixed and inflation-sensitive components.
Through the end of April 2024, Series I savings bonds that you purchase will pay a combined rate above 5%. The variable component, which makes up the majority of the rate, will then adjust twice annually throughout the term. This can offer you an advantage when inflation goes up but leads to lower rates when it’s down.
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