7 Places To Save Your Extra Money

7 Places To Save Your Extra Money

Published June 27, 2022   By Liz Hund

Whether you’ve come into an inheritance, earned a bonus at work or made a profit selling your house, having extra money gives you a chance to grow your savings and maybe fulfill a goal, such as saving for a down payment on a new car. But deciding on the best place to stash your cash isn’t always easy.

Return on investment is an important factor to consider, but liquidity and the length of time before you need to access the cash are also important. Safety and investment costs should also be considered when determining where you should save your money. With that in mind, here are some options to consider.

1. High-yield savings account

A high-yield savings account is an attractive option for those who want to grow their savings while having easy access to the money, just in case.

To put the earnings into perspective, the yields on traditional savings accounts are typically very low, as little as 0.01 percent APY. But the top high-yield savings accounts earn above 1 percent APY.

You can open a savings account to build an emergency fund or save for a vacation or home repair while having safety and liquidity.

If you need to access portions of your money from time to time, savings account restrictions might be a problem. There could be a limit of six withdrawals or transfers per month, depending on the bank’s policies.

Another thing to note is that a high-yield savings account might offer a sign-up bonus or interest rate bonus, but you’ll likely have to maintain a sizable minimum balance in the account to earn the higher rate.

2. Certificate of deposit (CD)

The main difference between a savings account and a certificate of deposit is that a CD locks up your money for a set term. If you withdraw the cash early, you’ll be charged a penalty.

CDs can be disadvantageous when interest rates are low. But they also protect savers from falling interest rates because they allow you to lock in a fixed rate.

Though longer-term CDs offer better interest rates, you’re unable to access the funds during that time without paying a penalty in most cases.

One strategy to grow your earnings is to open several CDs that mature at different times. This is called CD laddering. Laddering offers flexibility and less risk than one big CD with one maturity date. By having several short- and long-term CDs, you can take advantage of higher interest rates without too much risk and still have the flexibility to take advantage of higher rates in the future.

To continue reading, please go to the original article here:

https://www.bankrate.com/banking/savings/places-to-save-your-extra-money/#financial-planner