When we look for a place to invest, we are often tempted to find something that promises “tremendous returns” within a short period.
Keep in mind that when there is always a possibility to get a fundamental financial return, you may still encounter sudden obstacles that can lead to your money loss.
Bear in mind that in case of any loss, when you need urgent money, you can always refer to the
online loan app, which is available around the clock.
When you are young, it may not seem scary since you have the whole life ahead. However, as you grow older, life teaches you to be cautious with everything, let alone financial issues.
The following examples of safe investing will not likely make huge returns compared with those that can bring a stock market.
At the same time, they ensure a safer place for your funds, bringing you steady and moderate returns.
Bank Savings Deposits
This savings account allows you to deposit your cash with the return of a certain interest rate. Usually, a bank remunerates 0.05 – 0.07 interest on deposits that do not exceed 100 thousand USD.
Advantages and Disadvantages of Bank Savings Deposits
Fast to open
Inflation may overpower low rates
Availability of FDIC insurance
Quick access to your finances with little restrictions
Any gained bank rate is subject to taxation
Most relevant for emergency savings
State treasury bills are another safe place for your finances. The government of the USA ensures that all your finances invested in its securities will be returned to you with a small interest.
Anything issued by the State is very, very safe. The State has many opportunities and power: it can always sell more securities, print more cash, or gather and raise taxes.
The economy of the USA is so huge that even other countries make their investments in it by buying treasury bonds, notes, and bills.
Benefits and Drawbacks of Treasury-Issued Securities
direct investment of small sums (even 30 USD) Little interest rate
Big choice of options for investments
Availability of maximum limit
Enticing market conditions
Sensitivity to inflation and volume of bank rate
Absence of local taxes on earned interest
Subject to national taxation
Certificates of Deposit
These certificates are truly considered the safest place for investing. Such CDs are the correct choice for those who prefer the lowest possible risks.
Do You Know?: Over the forecast period 2021-2028, the global certificate of deposit market is expected to grow at a CAGR of 8.6%.
However, be advised that your reward here will not be the highest one as compared to other sources for finances.
A vital moment is that even 500 USD will be enough here to start with. The interest is consistent for the whole period.
Pros and Cons of Certificates of Deposit
Insurance reaches 250 thousand USD per emitter
Early withdrawal penalty
Rather high-interest rate
Certificates of Deposit can be immobilized and taken out of circulation early
Spectrum of terms that include penalty-free CDs
Money Market Accounts
Money market accounts refer to an interest-bearing account at a bank or credit union. It usually tends to pay higher interest rates than other types of savings accounts.
Nonetheless, it limits the number of transactions made by check, debit card, or electronic transfer.
Statistics: The grapes above demonstrate stats on the financial assets of money market mutual funds in the United States from 2000 to 2022. However, In 2022, the financial assets of the money market funds exceeded 5.2 trillion U.S. dollars .
Although, you are open to making unlimited withdrawals and payments. This can be done via an ATM or by making the withdrawal in person, by mail, or by telephone.
However, MMAs are suited for short-term goals rather than long-term financial planning and are decisive for calculating tangible net worth.
Benefits and Drawbacks of Money Market Accounts
Higher interest rates
Minimum balance requirement
These accounts are FDIC-backed
Cash Management Accounts
These accounts are like turbocharged money market accounts. It provides easy access to your cash and a debit card for everyday expenses.
Lately, they have become popular among online brokerages and robo-advisors.
Despite this, the balance also earns a tidy annual percentage yield (APY).
APYs are something that is reserved for accounts with limited access, like high-yield savings accounts and certificates of deposit (CDs).
While talking about its past, these accounts were structured as money market mutual funds with check-writing privileges.
Interesting Fact: Merrill Lynch introduced the first cash management accounts in 1977.
Do you want to know which bank offers cash management accounts? To answer, these accounts are offered by non-bank financial institutions.
Keep in mind, via alliances with banks, they’re still backed by the FDIC.
Strengths and Flaws of Cash Management Account
Higher APY than traditional savings accounts. Money can grow at a rate as high as 4.80%
May offer higher FDIC insurance limits
Lower yields than the stock market
Low fees and account minimums
Lower yields than the stock market
Investing can be a smart option for your emergency fund or other savings goals. This is because it typically has low fees.
All you have to do is deposit your money and earn a higher rate of interest than you’d get with a traditional savings account.
Amongst the choices mentioned above, the best option depends on your financial goals and time horizon.
Combining them all together, it often helps your money grow faster.