We want our savings to grow. Gone are the days of our savings just staying stagnant in some forgotten account until we’ve reached our 50s. Now, it’s all about proactively investing in low-risk funds that can grow higher into the future. Here are some essential options for you if you want your savings to grow fast.
High-yield Savings Account
If you’re a first-time saver or if you’re only a few years into your career, you might have not even heard of an account such as this one. You might have thought that it might not have existed. However, a high-yield savings account is the first thing any banker will tell you is the best place for your savings. It’s a safe, low-risk option that’s available everywhere.
So you might have gotten a savings account but not a high-yield savings account, and now you’re asking yourself, what’s the difference? Well, the answer is on the name alone: high-yield savings accounts have a higher opportunity to grow than a traditional savings account. Specifically, we’re talking about 20 to 25 times more than any savings account in the market.
Let’s compare: a traditional savings account will only yield you a 0.10% per annum growth. So if you put $10,000 on a regular savings account, you’d only get $10 by the end of the year. However, putting your money into a high-yield savings account can yield you at least 2% of growth by the end of the year, so you’ll effectively get $20 out of your $10,000. That’s a 100% growth when compared to traditional savings accounts.
Online banks have higher growth rates for a high-yield savings account. They don’t need to pay as many employees or rent for their operations. This means that they can offer high-yield savings account for as much as 5% per annum growth. Remember that you don’t have to manage this account actively. All you have to do is sit around and watch it grow. But it doesn’t hurt to invest more every year into this account.
Individual Retirement Account (IRA) and 401(k)
Next in line are IRAs and a 401(k). Essentially, these two come together, and they are the best options for your retirement fund. If you want your retirement to go as smoothly as possible, make sure to invest in these two.
IRAs are savings accounts that offer tax advantages, which means that they have higher and more stable growth rates than any investments out there. However, you can only put a fixed amount of money into your IRA account to avoid exploiting these accounts. This is around $6,000 to $7,000, depending on your age. A 401(k) pretty much works the same way, but this time it’s your employer that’s deducting from your income.
So among these two, it’s an IRA account that you have to open manually unless your employer doesn’t offer 401(k) in their company, which is highly unlikely now that it’s mandated by law for businesses to provide such a savings program.
Short-term Certificate of Deposit
A short-term certificate of deposit is one of the most attractive options for savers. Like high-yield savings accounts, this option can be found in banks and many financial institutions. It also has a decent growth rate that isn’t high-risk.
Essentially, a certificate of deposit is you agreeing with a financial institution to put money into their account and not touch it for years to come. Each bank offers different agreements to consumers, but usually, the longer you choose to leave the money with them, the higher your returns would be.
A short-term certificate of deposit is different in the way that it depends more on how much you’re putting into the account than the period of deposit. So if you’ve saved up a decent amount of money for quite some time and you want fast returns, you should open a short-term certificate of deposit with your local bank.
Lastly, we come into loans. You might think that loans are the riskiest investment opportunity you’ll ever take, but some loans are better than others, and one loan you should look out for is a home mortgage. The mortgage is an attractive investment option, especially if you’re planning to buy a home this year. It’s money well spent and an investment that will continuously grow the longer you keep it with you. So you’d make a mistake by not putting your savings into one.
The best option for you is to sign up for an FHA loan. It has low downpayment and even lower interest rates. Depending on your earnings and credit score, they can let you borrow up to $900,000. This is the best option for you when it comes to mortgages.
You should never make your savings stagnant. They should be growing in their own way in a low-risk environment, and you can do exactly that by putting your investments in the options above.