Here’s Why Putting Your Money in a Savings Account is a Bad Idea
You must be thinking that investing in a bank’s saving account is a great way to increase the value of your money, especially since you don’t have to take on any risk. After all, you are promised a return for simply placing your funds in an account. Combine that with an increasing interest rate, and this sounds like the best investment in the world.
However, that is inaccurate. You see, while the interest rate is increasing, it is not translating into higher returns for you. Although when you go to your local bank to borrow funds you are charged the new, higher interest rate, the return you are promised on your funds in the savings account remains, more or less, the same.
Not only that, but you don’t even get a fraction of a single percentage point for your funds. In fact, the returns, on average, for savings accounts currently stand at 0.09%, and for money markets are 0.16%, according to figures reported by the FDIC. If viewed from a holistic perspective, especially considering the rate of inflation which stands at around 2%, this means you are actually losing money, instead of gaining on it, for as long as it sits in your bank’s savings account.
But there is no need to panic. We have a few investment options which offer a much higher return than a bank’s savings account.
Go For Online Savings
Although it may seem like we are asking you to take out your money from one savings account and deposit it in another, there is a difference between how online banks and brick-and-mortar banks work, especially when it comes to their ability to offer returns to their customers. For example, with brick-and-mortar banks, the operating cost is much higher compared to online banks, which means they must also account for all of these costs before paying a return to their investors.
Since online banks don’t have such operational costs, which can be quite significant in some cases, hence they are able to offer a higher rate of return on your savings. In the past there have been significant trust issues, whereby investors were reluctant about putting their faith in online banks. However, now, as considerable time has passed, trust in online banks has increased significantly. Plus, the rate of interest they offer is much higher: banks like Ally Bank or Synchrony Bank are offering rates as high as 2%, with some paying out even more.
Invest in US Treasury Securities
If you are looking for an investment as safe as a savings account in your local bank, then there is no safer investment in the world than US Treasury Securities. These financial instruments come in various term duration, but the ones you want are the short-term securities, which mature anytime between one month and one year.
The yields available on these securities are quite impressive. While the one-month T-bill would give you 2.36% in return, the one-year T-bill offers as high as 2.7%. Also, the amount these securities pay out in interest are also exempted from the income tax charged by your state, which is an added benefit of investing in T-bills.
Stocks are a Great Option
Yes, investing in the stock exchange can be a very risky move, but you can minimize that risk by investing only those funds which you are certain you won’t require for a considerable amount of time. The reason behind this is that once you invest in a stock, you can’t say for sure whether the price of that stock will move upwards or downwards, and if it moves downwards and you have to liquidate your investment, you will end up losing a lot of money.
What you are looking for is a long-term investment in those stocks which have historically offered a high dividend yield. Some stocks pay out as much as 4%, while stocks also exist which are known to pay out a lot more in dividends.
More in Bank Stories
Hailey and Justin Surprise Fans with Matching Wedding Rings, And You Won’t Believe How Much They Cost!
In June 2018, Justin Bieber and Hailey Baldwin shocked the world when they reignited their romance, just weeks after the Canadian singer...October 23, 2022
Kelly’s Gloomy Financial Situation: One Bank Account Has a Reported -$13 Balance
‘90s kids would know who singer-songwriter R. Kelly is, he was extremely popular at the time, thanks to his undeniable talent...October 23, 2022
Kelly Clarkson’s Determination to Earning Money Is All the Motivation You Need Right Now
Before The Voice came out and took away a major part of its fan base, American Idol was the show that...October 23, 2022
7 Simple Ways To Get Rid Of Stress
Are you sometimes too stressed out to even think clearly and have no time for a therapy or to relax properly?...October 23, 2022
Celebrity Ventures That Surprised Everyone
Actors, writers, singers and TV stars are all famous in their world. On many occasions, they have ventured out into businesses...October 23, 2022
This Clever Plan Could Help Disney Dominate Netflix By 2020
In 2006, senior Disney executives predicted an enormous shift in the media industry. They predicted that the modern media would consist...October 22, 2022
David Beckham and Simon Fuller No Longer Business Partners! What Will Happen to the Beckham Brand?
More than two decades in doing what he does best, David Beckham announced that he was retiring from football at just...October 22, 2022
Jeff Bezos Might be a Multi-Billionaire, But He Refuses to Spend Because of This Surprising Reason
When you think about all that you would want to do if you had a billion dollars, we bet your list...October 22, 2022
Goodbye Cassini : Check Out The Grande Finale Of This 20-Year Space Journey
If you have been watching the news for the past couple of days, then you must have heard the name ‘Cassini’...October 22, 2022