Everyone wants to know how they grow their money quickly while putting in as little effort as possible. Work smarter, not harder, right? That’s what I’m all about – and I want to help you do that too.
In fact, because we have sky-high interest rates in the US right now, we have some unique opportunities to passively grow money more effectively than ever.
Today, I’m going to talk about two places you can put your money that will allow it to grow without you having to lift your little finger: high yield savings accounts and certificates of deposits (CDs).
Easy Ways to Passively Grow Your Money
High Yield Saving Accounts
High-yield savings accounts are a type of savings account offered by banks or financial institutions that typically offer a higher interest rate compared to traditional savings accounts. These accounts are designed to help you grow your savings faster by earning a higher rate of return on their deposited funds.
The best high yield savings accounts of 2024!
Another great thing about high yield savings accounts is that they keep your money accessible. So, if you have a chunk of money that you want to sit somewhere where you can get it fairly easily – for example, an emergency fund – then high yield savings accounts can be a great option to grow your money faster while still keeping it somewhere you can get it quickly.
High-interest savings accounts are typically offered by online-focused banks and credit unions.
Here are a few things to consider when picking a high yield savings account:
- APY (aka interest rate): The APY or annual percentage yield is the interest rate that your money will get from this account, and will determine how quickly your money will grow. The higher this number is, the better.
- Monthly fees: Monthly fees will eat into your savings, and there are plenty of great high-yield savings accounts that don’t have any fees, so try to find an account with zero fees. The lower your monthly fees, the better.
- Withdrawal or transfer fees and limits: Some accounts will charge fees for transferring money between accounts or only allow a certain number of withdrawals per statement cycle. This isn’t necessarily a bad thing; after all, the goal is primarily to leave your money alone so it can grow. But it is something to pay attention to when considering your options. Make sure you understand how the fees work and select an account that matches up to how you plan on using it to keep fees as low as possible.
- Minimum deposit/balance: Some banks require you to deposit a certain amount in order to open a savings account or maintain a certain balance. Choose an account whose minimum balance is something you can maintain.
It’s important to note, however, that the APY that savings accounts offer when you sign up can change at any time. These rates are variable and often go up or down in accordance with the Federal Reserve changing its benchmark interest rate.
So, at the time of publishing, this is a really great time to put your money into high yield savings accounts. Because the Fed has been raising interest rates to fight inflation, the rates of some high yield savings accounts are higher than we’ve seen in decades!
Keep in mind that these rates are likely to come down as the Fed lowers interest rates again. But even still, the average national rate for a traditional savings account is 0.47%, but a high-yield savings account earns up to 10 times that rate or more.
CDs
Certificates of Deposit (CDs) are another type of savings account. Like high yield savings accounts, CDs tend to have a much higher interest rate than a traditional savings account. There are a few differences between this and a high yield savings account that are important to note.
- CDs are less “liquid” than HYSA - meaning there are limits to how you can access your money. Unlike a high yield savings account, when you put your money into a CD, you agree NOT to withdraw it for a specified period of time. This could range from a few months to years. If you withdraw your money early, you will have to pay a penalty fee to the bank, so make sure you pay attention to that before investing your money.
- When you put your money into a CD, your interest rate is locked, unlike a high yield savings account, where the interest rate fluctuates based on external economic factors. This means that if you get a 5-year CD with a 5% interest rate, you’re guaranteed that 5% no matter how much interest rates rise or decline over the next 5 years.
CDs are considered low-risk investments and are typically used by people who want to earn a higher interest rate than a regular savings account while preserving the principal amount.
If you want to open a CD, here are a few things to consider:
- Length of CD: the length of CDs ranges from a few months to 10 years. The longer you leave your money in, the higher the interest rate. But you want to make sure you won’t need to withdraw that money early or you’ll face paying penalty fees.
- Interest rate: this determines how much your money will actually grow. Thanks to the interest rate hikes, CDs are paying their highest interest rates in 20 years, making them an attractive choice for investors. Again, the higher the better
- Early withdrawal penalty: it’s good to know going in how much you’ll risk paying if you do decide to withdraw your money early.
Don't panic...
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