How to Invest Cash Safely at the Highest Interest Rate

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The national average APY on savings accounts is just 0.35%, according to the Federal Deposit Insurance Corporation (FDIC).

For example, Chase offers 0.01% APY for savings accounts. Most of my friends closed their bank accounts and transferred their assets to another account.

In this post, you’ll learn about other options to keep your money while growing them.

Disclaimer: I’m not a financial expert. All content provided is for informational purposes only. Please read my full disclaimer here for more info. Please note that this article is written in 3/25/2023.

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Money Market Account

Money market accounts offer higher interest rates than regular checking and savings accounts. Because of that, money market accounts tend to have higher opening balance requirements than standard checking or savings accounts. Some consumers might find these account minimums challenging to meet. But it’s insured by the FDIC (Federal Deposit Insurance Corporation) or the NCUA (National Credit Union Association) up to $250,000 per depositor, per ownership category.

Example of Money Market Accounts

  • Discover Bank Money Market Account/3.5% APY
  • Sallie Mae Money Market Account/3.6% APY
  • Ally Bank Money Market Account/2.8% APY
  • Zynlo Bank More Money Market Account/2.25% APY
  • Vio Bank Cornerstone Money Market Account/4% APY

Certificates of Deposit (CDs)

Certificates of deposit are considered to be one of the safest savings options. It is a savings account that holds a fixed amount of money for a fixed period, such as six months, one year, or five years, and in exchange, the issuing bank pays interest. During this period, you can’t take out money. You can cancel CDs, but you will need to pay penalty fees. When you cash in or redeem your CD, you receive the money you originally invested plus any interest. A CD bought through a federally insured bank is insured for up to $250,000.

Example of Certificates of Deposit (CDs)

  • Marcus by Goldman Sachs High-Yield CD/minimum $500/up to 4.5% APY
  • Discover Bank CD/minimum $2500/up to 4.5% APY
  • Barclays Online CD/up to 5% APY

High Yield CD

This is a CD offered by an online bank. It is a CD version of the High Yield Savings Account, with an FDIC guarantee of up to 250,000.

High-Yield Savings

Just like Money Market Accounts, High-Yield Savings accounts offers higher annual percentage yields (APY) than standard savings accounts. It’s also insured by the FDIC (Federal Deposit Insurance Corporation). The difference between money market accounts and high-yield savings accounts is the access they provide to your money. Money market accounts tend to come with checkbooks, whereas high-yield savings accounts typically don’t. Also, most High-Yield Savings are offered online.

Example of High-Yield Savings

  • American Express National Bank/3.75% APY
  • LendingClub High-Yield Savings/4.25% APY
  • Discover Online Savings/3.6% APY

Money Market Funds

A money market fund is like other mutual funds. Since it’s not a savings account, you could lose money and there is an expense ratio. (Maintenance fees) Money market funds usually hold securities like U.S. Treasury bonds, corporate bonds, and other short-term, low-risk investments to achieve conservative gains instead of aggressive growth. Some investors use money market funds as an alternative to a high-yield savings account.

Example of a Money Market Funds

  • Fidelity Government Money Market/4.44% (7-Day Yield)/ Exp Ratio 0.42%
  • Vanguard Federal Money Market Fund/4.52% (7-Day Yield)/ Exp Ratio 0.11%
  • Goldman Sachs Treasury Solutions Fund/4% (7-Day Yield)/ Exp Ratio 0.45%

Wrapping Up

We all understand that the safest investments don’t provide the highest returns. A savings account is the safest place to keep your money. A high-yield account can provide decent returns. Stocks gave the highest average annual returns but with risks. CDs should offer higher returns than most savings accounts, but that comes at a loss of flexibility.

Now it’s your turn. Now it’s your turn. How do you invest cash safely at the highest returns?