CD’s, Money Market Deposit Accounts, Mutual Funds and Savings Bonds
CD’s, or certificates of deposit are currently offering rates as high as 4.62 percent. You can increase your savings by this much if you do not need ready access to your cash. Money is placed in a CD fror a set amount of time and there is a penalty for early withdrawal. Do not choose a CD if you think you might need to access your cash for any reason. The best thing about CD’s is that they are FDIC insured and offer a relatively high return.
Money Market Deposit accounts or MMDA s are a better choice if you need acess to your money. They are also a good choice if you want to begin an investing accountant that you would like to add to over time. They allow free acess to your money and you can opt to make deposits as you go. The avergae current return is about 2.07. If you are keeping your money in a standard checking account, this is an option to consider. You will have virtually the same services you have now, but at a higher return. Some institutions do require a certain balance to open this type of account. Others limit the number of transactons a month. A good option to consider might be to put a certain amount of your savings in to this type account, while keeping some money in a regular checking account.
There are many different types of money market mutual funds to chose from . Most offer check writing priveldges. Your money is not tied up and there is usually no fee to access it. The better mutual funds offer tax exempt earnings. This allows you to keep more of the gain you earn. It is worth finding one of these money market funds, for sure. The current average return on a fund is roughly 2.1 percent. Your money is not government insured and there are manageemnet fees. Make sure that you pick a reputable,well known, long established fund and decide it thier fees are within what you are willing to pay.
Lastly, savings bonds are known for thier safety. These investment planss are insured, not by the bank, but by the government. They are only for those who will not need access to thier money. Early withdrawal penalities can be high so never buy a savings bond if you think you wil need to access your savings. EE bonds currently offer a return of around 3.25 percent and I bonds 3.67 percent. There are alots of variations in how long a bond “takes to mature”, that is how long the mney is held till it earns the percentage. If you have never invested before why not put some money into a bond that matures quicky. I think that once you experience what it feels like to get the money returned, plus some, you will enjoy having savings bonds.
If your idea of investing for the future is amassing money in a savings or checking account, realize that you can do better that in terms of returns. You do not have to take huge risks in order to invest. Any of the options above will earn you more than a bank accountant.
Happy investing…Judy
