Yea that's right, make your money work for you. It just sits in your account generating income while you add more funds to generate even more income. It doesn't have to be in a bank. You can purchase CD's, Stocks, Bonds, Mutual funds, etc. I myself do not like exposing my money to risk of losing it. So I put it in a high yield interest account like with American Express. currently they give me 1.0% and that's way better than my bank 0.30%. Now a days, most banks will insure 250,000 or more. I also suggest going with a credit union. My credit union has been the best and I only was charged 30 dollars once for over draft. But now we have overdraft protection. Which leaves your account in the negative or removes the funds from your savings account.
You also have to keep in mind your liquidity needs. If you need quick access to cash, putting it in the bank is your best choice. If you really don't need the cash, it can be put towards a few years in a certificate of deposit. The longer it sits there, the better the interest. Liquid cash and interest amounts are opposite of each other. You cant expect to get high interest and taking out money frequently. You can easily find a CD with an interest rate of 3 to 5 percent. Usually it would be for a few years. A great way of locking in a high interest rate is to use a method called CD laddering. It is basically buying CD's in different terms which can go as high as 5 years. Lets say you buy three; one for one year, the next for three years, and the last for 5 years. Usually for 5 years you get the best interest rate. But I'm sure we all can't keep all our money in a CD for five years. But you bought a CD for one year which at the time of maturity, will go toward a new CD for 5 years. You can find out for yourself on this web site
http://www.bankrate.com/finance/cd/certificate-of-deposit-investing-strategies-1.aspx
You also have to keep in mind your liquidity needs. If you need quick access to cash, putting it in the bank is your best choice. If you really don't need the cash, it can be put towards a few years in a certificate of deposit. The longer it sits there, the better the interest. Liquid cash and interest amounts are opposite of each other. You cant expect to get high interest and taking out money frequently. You can easily find a CD with an interest rate of 3 to 5 percent. Usually it would be for a few years. A great way of locking in a high interest rate is to use a method called CD laddering. It is basically buying CD's in different terms which can go as high as 5 years. Lets say you buy three; one for one year, the next for three years, and the last for 5 years. Usually for 5 years you get the best interest rate. But I'm sure we all can't keep all our money in a CD for five years. But you bought a CD for one year which at the time of maturity, will go toward a new CD for 5 years. You can find out for yourself on this web site
http://www.bankrate.com/finance/cd/certificate-of-deposit-investing-strategies-1.aspx
No comments:
Post a Comment