Savings Strategies: Best Investments To Grow Your Money

Saving and investing are two different ways to manage your money, each serving a unique purpose. Savings are usually designated for short-term financial goals or emergency funds and are often kept in a savings account at a bank or credit union. On the other hand, investing is a long-term strategy where you purchase assets such as stocks, bonds, exchange-traded funds (ETFs), or mutual funds to earn returns over time. While saving can help you achieve short-term goals like buying a new car or taking a vacation, investing is more suitable for larger, long-term goals like retirement or paying for your child's education. Understanding the differences between saving and investing can help you make informed decisions about how to allocate your money and work towards your financial aspirations.

Savings accounts

Benefits of Savings Accounts:

• FDIC Insurance: Your funds are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA), protecting your money up to $250,000 per depositor, per institution. This provides security and peace of mind.
• Earn Interest: Savings accounts typically offer higher interest rates than checking accounts, allowing your money to grow over time. The interest is calculated based on your account balance and is usually paid monthly or quarterly.
• Easy Access to Funds: Savings accounts provide easy access to your money, often without penalties for withdrawals. Some even allow ATM withdrawals, making it convenient to access your funds when needed.
• Encourage Regular Saving: Seeing your savings grow over time can be motivating. Many banks offer automatic transfers from checking to savings accounts, helping you save effortlessly.
• Low Fees and Minimums: Many savings accounts have low or no fees and minimal balance requirements, making them accessible and cost-effective for building your financial stability.

Types of Savings Accounts:

There are different types of savings accounts to consider:

• Traditional Savings Account: These accounts usually offer lower interest rates but often have low or no minimum balance requirements, making them a good option for those just starting to save.
• High-Yield Savings Account: High-yield savings accounts offer higher interest rates, helping your money grow faster. However, they may require higher minimum balances and sometimes charge maintenance fees.
• Money Market Account: Money market accounts provide competitive interest rates and offer the convenience of check-writing privileges. They typically have higher minimum balance requirements and may charge fees.
• Certificate of Deposit (CD): CDs offer a fixed interest rate for a set term, usually between six months and six years. They often have competitive interest rates but lack the liquidity of other savings accounts.

Choosing a Savings Account:

When choosing a savings account, consider the interest rate (APY), fees, minimum balance requirements, and accessibility. Compare different accounts to find the best fit for your financial goals and ensure your money is working hard for you.

High-yield savings accounts

When choosing a high-yield savings account, it's important to look for accounts with competitive interest rates, low fees, and a minimum balance requirement that you feel confident you can regularly maintain. It's also crucial to ensure that the bank is a member of the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA) to ensure your deposits are insured up to $250,000 per depositor in case of bank failure.

• SoFi Bank: Offers an interest rate of up to 4.30% APY and has no account fees or minimum balance requirements. It also offers fast money transfers and budgeting tools.
• Bask Bank: Offers a highly competitive interest rate of 4.85% APY with no monthly fees or minimum deposit requirements. However, it has slow transfer times and no Zelle availability.
• Discover Bank: Provides excellent customer service with no monthly fees, minimum opening deposit, or minimum balance requirements. It also offers a sign-on bonus.
• UFB Direct: Has no minimum opening balance requirements or monthly fees, and offers access to a large network of ATMs. However, it has a sparse user dashboard and limited technical features.
• Zynlo Bank: Has a streamlined account opening process and offers savings goals and roundup features. However, it has a higher minimum opening deposit of $10 and does not offer chat support.
• Synchrony Bank: Provides a smooth account opening process and efficient linking of external accounts. However, it has limited wire transfer options and finding customer service information on the website can be challenging.
• EverBank: Offers budgeting tools and swift deposit speeds. However, the website can be clunky, and there are limited physical branches.
• Upgrade: Boasts a quick application process and competitive interest rates. However, there are no ATM access or joint accounts available.

Money market funds

There are several types of money market funds, each investing in different kinds of securities in addition to holding cash and cash equivalents. These include government MMFs, which invest in cash, government securities or repurchase agreements; short-term credit (Prime) MMFs, which can also invest in securities issued by banks, corporations and other non-government entities; and municipal MMFs, which buy municipal bonds and other debt securities, offering potential tax benefits to investors.

Treasury bills

T-bills are sold in minimum increments of $100 and can be purchased directly from the U.S. Department of the Treasury through auctions held on its TreasuryDirect website or through mutual funds, banks, secondary markets, brokerages, or financial advisors. They have maturity dates ranging from four weeks to one year and are sold at a discount to their face value. For example, an investor might pay $950 for a $1,000 T-bill that matures in one year and receive the full $1,000 at maturity.

T-bills are also called zero-coupon bonds because they don't pay interest during the time between purchase and maturity. Instead, they are sold at a discounted rate and repaid in full when they mature. The difference between the discounted rate and the full price at maturity is the same as the advertised interest rate for T-bills.

There are two types of T-bill auctions: competitive and non-competitive. In a competitive auction, investors bid on the rate they are willing to accept for the T-bill, and their bid may or may not be accepted. In a non-competitive auction, investors commit to buying the T-bill at the rate created by the competitive auction, and their full order is always filled (up to $10 million per auction).

T-bills are a good option for investors looking for a safe and secure investment with a short-term maturity. They have a low minimum investment amount, are highly liquid, and offer tax advantages since interest earned on T-bills is exempt from state and local taxes. However, they typically have lower returns compared to other investment options like stocks, exchange-traded funds (ETFs), or real estate.

Investment apps

Stash

Stash is a highly-rated app that offers an all-in-one solution for your financial goals. It provides a portfolio managed by experts, automated saving and investing tools, a Stock-Back Debit Card, and expert guidance. The app is easy to use, and you can set a regular investing schedule and take advantage of market moves with Auto-Stash. Stash also offers penalty-free withdrawals, retirement accounts, and custodial accounts. The app has a monthly subscription fee of $3 and is only available to US citizens, permanent residents, and select visa types.

Fidelity

Fidelity's app is great for beginners and advanced traders, offering real-time quotes, multi-leg options trading, a consolidated research offering, and a notebook to save ideas and articles from your mobile browser. The app has a highly-rated mobile app and provides strong customer service.

Webull

Webull offers commission-free stock, options, and ETF trades, along with a high-interest rate on uninvested cash. The app provides advanced features like charts and indicators, price alerts, a paper trading account, and voice command functionality. It has a separate app for trading crypto.

Interactive Brokers IBKR Lite

The IBKR mobile app offers advanced trading shortcuts, over 400 data columns, option exercise and spread templates, news, research, charting, and scanners. It also features a user-friendly interface and earns high ratings on the Apple App Store and Google Play.

J.P. Morgan Self-Directed Investing

This app is a clear-cut investment platform that is ideal for beginners looking to learn the basics of buying and selling investments. It offers commission-free stock, options, and ETF trades, along with an easy-to-use platform. The app connects all Chase accounts and provides in-person customer support at Chase branches. However, it may lack the tools and assets that more advanced investors seek.

Public

Public's app makes it easy to learn how to trade options through their Options Hub. You can ask Alpha, powered by AI, questions about any stock and easily manage your portfolio. The app offers commission-free stock, options, and ETF trades, along with rebates for trading options and an impressive selection of alternative assets.

Frequently asked questions