Are you looking for better ways to earn from your dollar than a savings account paying less than 1%? Unless you enjoy losing money due to inflation, there are better ways to earn from your money. Whether it’s investment opportunities or better-paying saving vehicles, it’s worth exploring if you want to earn more.
Remember that there’s no single best solution for everyone, but if you take advantage of at least a few items on this list, you should be heading in the right direction. Let’s dive into alternative solutions to low-paying savings accounts.
1. High-Yield Savings Accounts
Although some institutions still offer savings accounts paying less than 1% annually, plenty offer close to 5% as of mid-2024. A quick online search for “top high-yield savings accounts” will quickly lead you to the right place. Take a moment and evaluate what you’re currently being paid for your money. If it’s lower than 3%, consider exploring other high-yield options.
2. Certificates of Deposit (CDs)
Certificates of deposit (CDs) are similar to traditional savings accounts, except that they pay a fixed interest rate for your money. That interest will carry for a few months or years, depending on the type of CD you choose. The perk of CDs is they usually pay an annual percentage yield (APY.)
Although the interest rate may compete with traditional savings, keep in mind that it will be fixed even if the economy faces a downturn. For example, your CD won’t be affected if institutions are forced to offer a lower APY.
3. Money Market Accounts
Similar to CDs and traditional saving accounts, money market accounts (MMA) offer higher APY than some traditional savings accounts. The key difference between an MMA and a CD is that you have more flexibility in withdrawing your money. For example, an MMA allows you to use checks and a debit card. Depending on your needs, an MMA may be a better fit than CDs.
4. Treasury Securities
Treasury securities are secure investments because they are backed by the government. However, the trade-off will be lower APY and longer timeframes. For example, investing a large sum of money into a 30-year treasury bond may not be wise if you’ll need the money within a few years.
5. Dividend-Paying Stocks
Some companies pay dividends to their shareholders if they’re profitable. Although it sounds like a surefire way to earn passive income, profits aren’t always guaranteed. Just like any business, revenue ebbs and flows.
The good news is that there are companies with a better reputation where you’ll have a higher chance of receiving recurring revenue. To continue to grow here, you should invest consistently.
6. Real Estate Investment Trusts (REITs)
If you don’t have enough money to purchase a second home, real estate investment trusts (REITs) may come to the rescue. REITs allow you as an investor to earn dividends from the profits of a REIT company. As with any investment, you should do research before investing. However, you may be able to earn more than 5% with some REITs.
7. Peer-to-peer Lending
Banks aren’t the only ones lending out money. You can lend your money to other individuals or businesses via peer-to-peer (P2P) lending websites. On one end, you can earn up to 10% APY, but you also risk losing some money.
8. Index Funds
Index funds are still a proven investment vehicle for earning money over time. Instead of trying to beat the market, you capture the average. Because you’re charged low fees and can beat inflation, it’s a no-brainer to have in your portfolio.
9. Cryptocurrencies
Cryptocurrency is still not widely used in most popular retail stores, but Bitcoin and the blockchain are here to stay. As with any new technology, it will take time to adopt, but it’s worth getting to know. Read books or listen to podcasts to learn more about crypto. You don’t have to invest all your money here, but it’s wise to understand how crypto may disrupt how we use currency in the future.
10. Education
This sounds cliche, but investing in yourself is the best of all the investments on this list. Why? Because if you don’t continue to learn, you won’t be able to take advantage of the different investment options available. If you continue to learn, you’ll be in a better position to earn more money and maximize its potential by investing in different vehicles.
11. Roth IRA
A Roth IRA is an individual retirement account that differs slightly from a traditional IRA. A Roth IRA allows you to contribute money as long as you want, and as long as you meet certain requirements, you can withdraw money from it tax-free. Importantly, it allows you to contribute to your retirement even if you don’t have a 401(k) or other employer-sponsored plan.
12. Exchange-Traded Funds (ETFs)
ETFs are a great investment because they tend to have low fees and investment minimums compared to mutual funds, making them more accessible to those with lower incomes. There are thousands of ETFs to choose from, including those that focus on specific industry sectors or commodities like oil. The specific one you choose will depend on your preferences ans investment goals.