Over the past couple of years I’ve worked to save up enough money for a healthy emergency fund. I now have roughly six months’ worth of savings and I’m still adding extra money to the account.
My next big goal is to save for an investment property. I still have a ways to go before I reach this goal but in the mean time I’d really like to earn more interest on the money that I am saving (emergency fund excluded.)
With that in mind here are some of the things I’ve already done and others that I’d like to do to give my savings account a boost.
Online Savings Accounts
Online savings account generally offer higher interest yields than brick and mortar banks do. The reason for this is that online banks have very little overhead and are able to pass some of that savings on to you.
I set up an account with ING Direct a couple years ago (now Capital One 360) and have had nothing but a good experience with them. Setting up separate, earmarked savings accounts is super easy and I can easily transfer my savings to the bank I have my checking account with.
Sadly, online banks that are commonly referred to as having “high yields” only earn you around 1% APY. Still, switching your money from a regular savings account to an online account is an easy way to earn you slightly more interest.
Here are some of the online banks that currently offer the highest APY: (subject to change)
Certificates of Deposit
If you’re not going to need your money for a while a certificate of deposit will earn you a little more than a high yield savings account.
A certificate of deposit is more or less a loan you give to the bank. You give the bank a certain amount of money and promise not to touch it for a specified period of time. In return you get paid in interest. However, if you withdraw your money before the term is set to expire you can be faced with penalties and even forfeiture of interest earned.
Just like savings accounts, certificates of deposits also come equipped with pretty low APY’s. The percentages vary depending on the length of the term, but from my research the highest APY I could find was right around 2%.
Buying stocks comes with risk and as many would tell you, buying individual stocks is pretty much a gamble. You could make a decent amount of money or you could lose it all.
I recently decided to take a bit of a gamble with a few hundred dollars of my savings. I bought three different stocks to test the water. One stock I felt was a fairly safe bet. It was a well-established company who I felt had a product that would be up and coming. Even if that product did fail the company had many other well established brands. The stock also paid dividends. Most of my money went here.
The other two stocks were complete gambles. I went with a gut feeling and put a small portion of money into them. I have since seen one of them double and then quickly fall right back down to the price I bought at.
Buying individual stocks is risky and isn’t where you’d want to put any emergency money. But with risk comes reward. And, if you do your research you can find safer companies to invest in.
If you don't want it to be a complete gamble, check out our free online investing training.
Peer to Peer Lending
Peer to peer lending was something I was excited about until learning that my state doesn’t allow it. But, if you’re looking for higher returns than you’re pulling from your savings account it may be worth a try.
Since its inception in 2007 more than 3 billion loans have been given through Lending Club. And, average returns range from 5.38% to 8.55% depending on which grade of borrower you lend to.
What’s great about peer to peer lending is that you can diversify your portfolio. Lending Club rates borrowers based on financial stability and you can choose who you want to lend money to. You can spread out the money you lend over hundreds of people, meaning less risk for you.
If you go the safe routes you’re not going to earn much interest. That’s okay though, you’ve got to do what’s right for you. However, if you have extra money in your savings account and you’re ready to take a risk for a higher reward, the last two options might work in your favor.
There are plenty of other options besides these four for earning more interest on your money. Take some time to research them and pick the ones that are best suited for your needs and risk tolerance.
How else have you been able to improve the interest you earn on your savings?