7 Savings Account Alternatives: How To Safely Store and Grow Your Money
Written by
Elizabeth Constantineau, AI Editor
Edited by
Elizabeth Constantineau
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In today’s financial world, keeping your money in a regular savings account might not always be the most efficient choice, especially if you’re looking to grow your funds. There are several alternatives that can provide not only a safe haven for your money but also a better return on your investment.
What Is Safer Than a Savings Account?
While savings accounts are generally considered safe thanks to FDIC insurance, they are not the only option for secure financial storage. Other options exist that provide similar security levels and may offer the potential for higher returns.
High-Yield Savings Accounts
One simple alternative is a high-yield savings account. These accounts are similar to traditional savings accounts but offer higher interest rates. Many online banks, like Discover Bank, offer these types of accounts. They’re still FDIC insured, which means your money is just as safe as it would be in a regular savings account.
Money Market Accounts
Another option is a money market account. These accounts often have higher interest rates compared to standard savings accounts and come with FDIC insurance as well. However, they might require a higher minimum balance and have limitations on how often you can withdraw money.
Certificates of Deposit
Certificates of deposit are time-bound savings instruments that typically offer higher interest rates than traditional savings accounts. The catch is that you agree to leave your money in the CD for a fixed period. Withdrawing early can result in penalties.
Treasury Bonds
For those looking for a virtually risk-free option, treasury bonds issued by the government can be a safe choice. They offer fixed interest rates and are backed by the government, making them one of the safest investments.
Peer-to-Peer Lending
Peer-to-peer lending platforms allow you to lend your money to individuals or businesses online, often yielding higher returns than traditional savings. However, this comes with a bit more risk, as the safety of your money depends on the borrower’s ability to repay the loan.
Roth IRA
Though primarily used for retirement savings, a Roth IRA can also be a smart place to store and grow your money. Contributions can be withdrawn at any time without penalty, although there are specific rules for earnings.
Online Investment Portfolios
Finally, consider online investment portfolios managed by robo-advisors. These platforms offer a way to invest in a diversified portfolio with minimal effort. They’re generally low-cost and can be tailored to your risk tolerance, although they do carry more risk than a traditional savings account.
Final Take
While traditional savings accounts offer a safe place to store your money, exploring alternatives can lead to greater financial growth. It’s crucial to balance the need for safety with the potential for higher returns, and always consider your personal financial situation and risk tolerance before making any decisions.
FAQ
Here are the answers to some of the most frequently asked questions regarding savings accounts.- Is there a better option than a savings account?
- Yes, there are several options that can be better than a traditional savings account, depending on your financial goals and risk tolerance.
- High-yield savings accounts offer higher interest rates while maintaining similar safety levels.
- Money market accounts and CDs can also provide higher returns.
- For long-term growth, investment accounts, like those managed by robo-advisors or retirement accounts like Roth IRAs, might be more suitable.
- Yes, there are several options that can be better than a traditional savings account, depending on your financial goals and risk tolerance.
- What is the safest place to protect your money?
- The safest place to protect your money is typically in an FDIC-insured account, such as a savings account, high-yield savings account or a CD at a bank. You can also look for NCUA-insured accounts at credit unions. U.S. Treasury securities are among the safest investments as they are backed by the full faith and credit of the U.S. government.
- What can I do instead of saving money?
- Instead of simply saving money in a traditional savings account, you can consider investing in a diversified portfolio, which may include stocks, bonds or mutual funds, for potentially higher returns.
- Other alternatives include the following:
- Using a high-yield savings account.
- Investing in a Roth IRA for retirement.
- Exploring peer-to-peer lending for potentially higher interest income.
- However, it's important to assess the risk associated with these options and consider your financial situation and goals.
Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.
