There are many ways to get a good return on your money than shoving it off under a mattress.
If everything is going well in our financial lives, we’ll have something extra to salt away after we deal with our expenses. However, having a nice pile of savings is just the beginning; we need to use it smartly.
With that being said, here are 3 financial instruments at our disposal that won’t just preserve our savings but help them grow as well.
1. Certificate of Deposit
There’s no better option than the certificate of deposit when it comes to earning fixed interest on your savings without much risk. In exchange for leaving your money in the account for a certain timeframe, the issuing bank pays your interest on your investment. You’ll receive your accrued interest and principal once you cash out your certificate of deposit at the maturity date.
Generally, how much interest you earn on your certificate of deposit depends on the length of the maturity term and the size of the deposit. However, the major downside of this instrument is that if you access your money early, you’ll have to face early withdrawal penalties, based on the terms of the financial institution you’re working with.
2. Tax-advantaged retirement accounts
After paying your debt and bolstering your emergency fund to a decent number, looking at your retirement savings is a good idea. A conventional IRA or a 401(k) helps you make pretax investments.
Most companies match your contribution up to a specific portion of your yearly compensation. Before investing money anywhere else, plan to contribute a good amount to benefit from their match. If your contribution is already fine, you can contribute up to the maximum contribution limit toward other accounts using your savings.
3. High-yield savings account
Compared to a traditional savings account, a high-yield savings account earns more interest while keeping your cash accessible and liquid, instead of tied up in lengthy investments. This makes them a fitting saving vehicle for your emergency fund as well as other savings you may need to access immediately.
With a high-yield savings account, you’ll get a return that would be far better than the practically negligible return you would get with a standard account.
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