The current economic state of our country is leading more and more people to try and save money by cutting corners when they can. Sometimes, however, people aren’t aware of how to just make their money work for them. This seems obvious, but a lot of people just simply forget to read into it. This is a little way to help save a few extra bucks this year; maybe it can help pay off the gas you had to chard on the credit card to make it to work the past couple weeks…
Highly unspoken of, money market accounts are an easy way to make a few extra dollars without tying up your money too much. Currently, many banks are offering no-fee money market accounts for anyone who opens an account up with $5k or more; this means that you are able to withdraw and deposit money into these accounts, which have an interest rate around 2.2% (as opposed to a typical savings account of .3% percent) and an apy of 2.3-2.4% without getting slammed with fees. Of course, if access to the money isn’t necessary, I would recommend CD accounts (if you’re not interested in stocks, cause that’s a whole other can of worms) which give you higher interest and apy rates that don’t change. The rates right at this moment seem to be looming around 2.7%, which isn’t a huge difference, but it does help if you can do it. Only a few years ago I was able to lock in at a 5.6% CD rate and made over $600 doing absolutely nothing. If you are more interested in the CD account; first try to get one the month of your birthday (they’ll often times offer a ‘birthday’ rate which is .5% higher most of the time) and check into your local credit unions, they tend to have slightly higher rates.
I know, I know, you say “what’s the point of making an extra 1.9% when I need to make serious money”. It doesn’t really seem like it would make a huge dent. Well, let’s do the math. If you already have exactly $5,000 to put in the bank; let’s say you put it into a regular savings account. In two years (.3%) makes $1.50 in interest a month; $36.00 in two years (depending on compounding interest). Doesn’t seem too bad. Now let’s do it with a 2.3% Money Market account from Bank of America. That $5,000 is now working harder for you, supplying you with about $11.50 a month; $276.00 in two years (and that’s without compounding your interest)! That’s an extra $10 a month for doing absolutely nothing. And of course, with more money the amount adds up quicker.
Okay, so you’ve got some savings that you want to keep your hands out of (another great thing about CD’s), and you want to get a 12-month CD at 2.8% for your $5,000. With compounding interest; there’s about $14.00 a month, $168 a year (which would be $336 a year if you re-opened it for another year or made it a 24-month CD). Not bad, not bad.
And remember, every bank in the United States (that I’m aware of) is FDIC covered (temporarily) up to $250,000; however, in a couple years it will be back down to $100,000 (yes, this might be the stupidest thing you’ve ever heard of cause it’s up there for me too). This really doesn’t affect most people, though. So all in all, this is an easy, safe way to make money with the money you’ve got. I suggest everyone go out and do it (if you’ve got the means, of course)!