Holding Cash in Light of Low Interest Rates? 6 Ways to Efficiently To Do it That Will Earn You More Money

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Holding cash as a flexible asset in times of economic concern is a trusted way to protect your money from marketplace swings or losses and enables easy access should a need arise. While most options won’t generate extraordinary returns, they will help preserve your purchasing power as the cost of living rises.

With current rates on high-yield savings accounts and certificates of deposits beating inflation, there are options that can serve you better than placing your money in a traditional savings account or stuffing it under your mattress.

The obvious advantage of cash is its liquidity and stability. Without having to lock it up or wait for it to mature, cash can be spent whenever you want without having to convert investments to cash or risk it losing value in a volatile market.  

Additionally, its value won’t decrease over time. A saved $5 bill might not buy you as much next year as now, but it’ll still be worth $5. Having physical cash on hand allows you to pay for unexpected expenses without putting it on credit and incurring high interest charges.

Here are six ways to efficiently hold cash that will earn you more money.

High-Yield Savings Accounts

It pays to put your money in a high-yield savings account now, with many high-yield accounts paying over 5.0% APY. High-yield savings accounts allow your cash to grow at a modest pace, but make sure you use a reputable bank or online lender that will federally insure your cash. Most — but not all — savings accounts are insured up to $250,000 by the Federal Deposit Insurance Corporation.

Make Your Money Work for You

Certificates of Deposit (CDs)

Certificates of deposit (CDs) are low-risk investments where you agree to leave your money with a bank for a set period, usually from a few months to several years. In return, you receive a fixed interest rate that is typically higher than what a regular savings account offers. Like high-yield savings accounts, CDs are federally insured, but you will be penalized for withdrawing early, so comparison shopping for the best rate is essential.

Money Market Accounts (MMAs)

Money market accounts are similar to savings accounts but often provide higher interest rates and may have limited check-writing capabilities. They’re a relatively safe option for storing cash and earning a bit more interest. Like the options listed here, MMAs are great for storing money for emergencies and short-term savings goals.

Treasury Bills (T-Bills)

T-Bills are short-term U.S. government debt securities, considered extremely low risk. They are sold at a discount to their face value and mature at the face value, providing a predetermined interest rate. T-Bills can be purchased through the U.S. Department of the Treasury or via a brokerage for terms ranging from four weeks to 52 weeks.

Peer-to-Peer Lending (P2P)

Peer-to-peer personal loans (P2P) are financed directly by individuals or small groups via a facilitator platform instead of through a bank or other financial institution. While this carries more risk than traditional savings options, it can also provide higher returns through competitive interest payments.

Make Your Money Work for You

Short-Term Bond Funds and ETFs

Investing in short-term bond funds, that invest in fixed-income securities and provide periodic interest payments, can offer higher yields than traditional savings accounts or CDs. Although there’s slightly more risk involved, short duration bond ETFs can potentially add extra income and are good stepping stones in pursuing temporary or extended investment goals.

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