Today, many Americans are still trying to get caught up on their savings in a slow-to-recover economy. Moreover, many of us remain hesitant about where we're putting our money these days and are unsure about financial management. Most financial professionals agree that having a balanced portfolio that includes adequate savings is important. So in addition to your investment and retirement accounts, it's always a good plan to have some of your money in accounts that perhaps aren't as volatile, yet still have the potential to earn you some savings.
The following are three savings alternatives to consider that may help you accumulate additional savings that could earn a return.
Certificates of deposit
Certificates of deposit or CDs, are pretty common ways to save. They offer you a modest rate of return with a great deal of safety as they are FDIC insured, when issued by a covered bank. Essentially, they are short-term loans to a bank, credit union, or savings and loan. The financial institution holds your money for a specified time period and restricts your access to the funds during that time. However, you can still have access to your money if you really need it. Just keep in mind that you may be subject to a penalty if you do.
Interest-bearing checking accounts
These are really just checking accounts that are offered through banks, savings and loans, and credit unions, but have interest-earning capabilities. However, most will require that you maintain a certain minimum balance in your account or you may be subject to additional charges.
Money market accounts
A money market account is similar to a savings account, but it might pay a higher interest rate. Some money market accounts also provide you check-writing capabilities, however, they often put a limit on the number of transactions you can do in a month. This type of account is likely to require that you maintain a higher balance than a regular savings account, and is FDIC insured if held with a covered bank.
As always, you should seek financial advice from a professional financial representative who can better address your individual needs.