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One of the largest benefits to saving your money is keeping it somewhere that can safely increase its value. However, more often than not, your traditional brick-and-mortar bank is not going to give you a great interest rate. In general, most banks only pay a fraction of 1 percent, with most according to the FDIC being around 0.09 percent for savings accounts and 0.16 percent for money markets. With the rise of inflation, you are likely losing money as your savings sits in your local bank. Instead, here are some unique options that can help you make more from your savings.
Online banks haven’t always been seen as trustworthy or safe, and if you asked someone a few years ago how comfortable they would be using an online bank they probably would have said it is too risky. However, with so many banks offering online banking options, what is really the difference between that and skipping the brick-and-mortar altogether?
Due to its nature, online banking does not have to spend money on things like overhead costs and payroll to keep branches all over the country open. Therefore, they are able to offer much higher interest rates on deposits and savings accounts. The interest rates are not just a little higher, they are often much higher than regular banks.
If you are planning to switch your savings account to an online bank, make sure you do a sufficient amount of research before moving forward. Good things to research include how long the bank has been around and whether or not they have FDIC coverage. If you choose to open a savings account with an online bank, it doesn’t mean you have to get rid of your brick-and-mortar bank. You can keep your old account for checking as well as loans, but moving your savings will earn you more money over time.
Treasury securities are divided into three categories, which depend on their lengths and maturities. T-Bills have the shortest range of maturities out of all government bonds, they are auctioned on a regular schedule. These kinds of securities are issued at a discount and then mature in value as time goes on.
T-Notes are in the middle range of maturities, and instead of several times throughout the year as with T-Bills, their maturity terms are every two, three, five, seven, and 10 years. Lastly, T-Bonds have the longest maturity period at 30 years. All three kinds are purchased online at an auction in 100-dollar increments, and they pay a lot more in interest than banks do.
Recently, yields on T-Bills have been anywhere from 2.36 percent in a month, to 2.7 percent in a year. An additional benefit is that the interest these securities pay are exempt from state income tax. This is a great option for a long-term or short-term investment depending on your personal financial situation and goals.
High-dividend stocks are a good way to invest your money for higher yields but also more risk. These stocks pay higher dividends however, they also can drop on value. For this reason, it wouldn’t be smart to store your emergency fund money in a high dividend stock. Instead, you may put a certain amount of what you have already saved into one so that you can increase the overall value of your money.
Usually, high-dividend stocks yield anywhere from 3 percent to 4 percent, and some can pay a lot more than this. If you are looking to invest your funds into this kind of stock you want to make sure it meets a few criteria. It should be in the S&P 500, meet certain minimum size and liquidity requirements, and have at the very least 25 years of consecutive dividend increases. It is also very important to keep in mind that while these stocks can decrease in value, they also have the ability to appreciate in value over time. Sometimes their long term appreciation will take years and even decades.
About the author
Roni Davis is a writer, blogger, and legal assistant operating out of the greater Philadelphia area. She writes for a bankruptcy lawyer in Philadelphia.