12 Places to Keep Your Money Safe — And Growing

by Tara Struyk on 12 August 2014 0 comments

Maybe you've heard a story like this: An entirely ordinary — and often reclusive — elderly person passes away, revealing the millions of dollars they have stashed away in their modest homes. One Nevada man died to reveal a fortune, including gold bars and coins, worth more than $7 million. His bank account was found to be holding a meager $200.

In an age when there are so very many options for saving, investing, and managing our money, the notion that people still really do put cash under their mattresses is a bit hard to imagine. Then again, if you've been faced with the task of deciding where to keep your savings, you've probably discovered it isn't an easy one, precisely because there are so many choices.

So where can you keep your money safe but still earn a decent return? Here are some key options.

Savings Accounts

They're simple, they're convenient, they're easy to find and they're perfectly safe in terms of protecting your principal investment. Because there is so much competition, you can also find a decent interest rate if you shop around. Just be sure to choose an account with no fees. Who wants to pay to save? (See also: Why Savings Account Interest Rates Are So Low)

Who It's Best For

Those who prioritize liquidity (the ability to withdraw your money whenever you want it without restrictions) above all other conveniences. If you're looking to save for shorter term goals, or for an emergency fund, a savings account is a great option.

Money Market Accounts

This type of savings account tends to provide higher returns than a typical savings account, but that also has more restrictions on withdrawals and minimum deposits. Some money market accounts even allow some check-writing privileges. These accounts are risk free in terms of losing your initial deposit and, like a simple savings account, are insured by the Federal Deposit Insurance Corporation (FDIC), which protects your deposits against bank failure.

Who It's Best For

Those who value safety and are willing to forego some convenience and accessibility for higher rates of return.

High-Yield Checking Accounts

Many checking accounts charge a monthly fee, but some checking accounts, often called "high yield checking accounts," actually offer pretty solid interest rates instead. These accounts are typically offered by local credit unions and online banks and, as of July 2014, some offered interest rates as high as 5% — although there are quite a few caveats to scoring that kind of return. You can run a search of these types of accounts and what they offer at CheckingFinder.

Who It's Best For

Those who seek safety, reasonably good liquidity and don't mind jumping through a few hoops for a higher return.

Certificates of Deposit

A certificate of deposit, or CD, is a sort of IOU from a bank in which the bank agrees to pay back the amount you deposited plus a specific amount of interest within a certain time frame. For example, if you buy a $1,000 CD with a 5% interest rate, you'll be owed $105 when the CD matures. Generally, you can't withdraw this money before the CD's maturity date without incurring a penalty. However, CDs are very low risk and generally provide higher returns than a savings or money market account. (See also: The Basics of CD Laddering)

Who It's Best For

Those who are seeking a long-term savings vehicle and don't expect to need to access their savings immediately.

U.S Savings Bonds

If you can afford to keep your money tied up for at least a year, U.S. savings bonds might be another option to consider. These super-safe investments are sold and backed by the U.S. government and they tend to provide competitive interest rates. As an added bonus, interest on government bonds (unlike corporate bonds) is accrued monthly and compounded semi-annually, helping your investment grow a bit faster. You may also get tax deferral or exemption benefits on the proceeds of government bonds.

Who It's Best For

If you're seeking safety and plan to keep your money invested for between one and five years, government bonds may be a good bet for you.

Pay Down Debt

We often think of savings as money that we save, but you could also think of it as money that you spend to save you money. If you have a lot of debt that you're trying to pay off, it's probably best to save up an emergency fund and then put the rest of any money available for saving toward your debt. If you consider that some credit cards have interest rates of 20% or more, paying down your balance actually has a pretty great financial return.

Who It's Best For

Those who have what's called "revolving debt," or debt that you aren't able to pay off at the end of the month and continues to compound interest charges. (See also: 5 Inspiring People Who Each Paid Off Over $100,000 in Debt.)

Pay Down Your Mortgage

Just as paying off your credit card or line of credit can provide a return in the form saved interest expenses, so can paying down your mortgage. Plus, if you consider that a home is one of the most valuable assets many people own, paying into that asset can act as a bit of a savings account you can cash in when you downsize later in life.

Who It's Best For

Anyone with a mortgage — as long as you have other essential savings bases covered, such as an emergency fund and retirement savings.

Real Estate

Not everyone is a fan of watching the number of digits in their bank balance grow; some people prefer to invest in something concrete, and that often means investing in real estate. Yes, the real estate market in the United States has had some serious lows in recent years, but over the long term, real estate has proved to have reasonable growth.

Who It's Best For

Those who like concrete investments, who can handle some long-term risks, and who aren't interested in liquidity at all. Seriously — it can take months, or years, to sell a property.

Your Workplace Retirement Program

If you have a workplace retirement program, use it. It's as simple as that. Not only will contributions to a retirement plan such as a 401(k) reduce your taxable income, but your investment will also go to work immediately to help ensure that your golden years really are golden. Plus, any employer contribution represents free money, so at least contribute enough to your plan to maximize your employer's matching program.

Who It's Best For

Anyone who has access to one, particularly if your employer matches some of your contributions.

An IRA

Most types of IRAs are investment vehicles that allow you to save money and defer paying taxes on that money until you retire. The benefit of this arrangement is that savings can grow faster without the headwind taxes represent. It is also assumed that people's income will be lower when they're no longer working, putting them into a lower tax bracket and allowing them to withdraw their funds at a lower tax rate when they retire. (See also: Choosing a Retirement Account)

Who It's Best For

IRAs are suitable for most investors, but there are many different types with different rules and benefits. Therefore, it's best to do some research or consult with a retirement planner to help you decide what kind of IRA might work best for you.

A Flexible Spending Account

Medical and other health related costs add up very quickly. That's why some employers offer what are called flexible spending accounts, or FSAs. In an FSA, your employer will deduct pre-tax income from your paycheck and set it aside for you to use on qualifying health expenditures that aren't covered by your regular health insurance plan. Often, you get to decide how much you contribute up to a certain limit. FSAs are a good bet because they ensure you have some money set aside for unexpected medical expenses. Because they're funded with pre-tax income, they can also significantly reduce your income tax bill.

Who It's Best For

Those who are concerned about medical expenditures, have health problems or have a number of dependents on their health plan.

Educational Savings Account

If you have children, an education savings account (read: college fund) may be a great place to park your cash. You can contribute up to $2,000 per year, and interest is accumulated tax free. The only caveat to avoiding taxes is that your child has to use the money by the age of 30 for qualifying educational purposes. (See also: 3 Reasons Not Save For Your Kid's College Education)

Who It's Best For

People with kids, especially if they're bound for the Ivy League – you're going to need all the money you can get!

Do you have a great savings vehicle I missed? Let me know where you're keeping your savings in the comments.

0
No votes yet
Your rating: None
ShareThis

comments

0 discussions

Add New Comment

CAPTCHA
This test helps prevent automated spam submissions.