When it comes to managing your finances well, there are a few things you must do. These include tracking your spending, keeping your expenses less than your income, and saving for your future. With all of the various savings vehicles out there today, it can be hard to decide which option is best for you.
If you’re looking to make a change to your savings strategy and aren’t sure how to get the most money for your efforts, consider the following breakdown of the best interest rates for each option.
When considering a standard savings account or a cash ISA (be sure you know your ISA allowance), you have two main options: An online bank or a traditional brick and mortar location. Chances are that you might already have one of these accounts, whether it’s through a credit union or online banking website.
Unfortunately, traditional savings accounts don’t pay much interest. If you have a large balance, you might be able to earn upwards of 4%, but those types of accounts are few and far between in terms of availability and what the average person can actually put into them. Chances are that if you have a traditional savings account, you’re currently earning less than 1% on your nest egg.
The largest benefit of having an account like this is that your money remains liquid and you typically have very easy access to it.
Certificates of Deposit
In the finance world, a CD can be a great way to earn extra money at a higher interest rate—but only if you’re willing (and able) to not touch the money for an extended period of time. CDs can range up to 5% and you’ll earn more by depositing more money for a longer period of time. Basically, the longer you can go without touching the money, the more you’ll be able to make!
Perhaps a bit antiquated in today’s online world, if you’re comfortable with letting the money you save sit for a long period of time, savings bonds issued by the government are still a way to make a bit more through interest. Depending upon the type of bond you purchase, its terms and how much you put into it, you can earn upwards of 3-4% on your investment.
Given the rise in social media and online interaction, peer to peer lending has arrived as a new way to make some serious money on your investment. Often facilitated through an intermediary, P2P lending is a way for ordinary people to lend money to their fellow citizens who need it most. Interest rates have consistently been meeting or beating the stock market at upwards of 10%, but you should exercise caution and do your homework before jumping into P2P because it’s truly lending—there is a certain amount of risk that you’ll never recoup your investment.
No matter which savings method or vehicle you choose, you should always fully understand all of the terms and conditions before you hand your money over. Not only will you be a savvy saver, but you’ll most likely make more money!
Which vehicles do you use to save your money?