Does your money go to work for you everyday, or does it stay at home and relax while you are at work??? If your money is sitting in a savings or checking account at a bank, it is earning less than 1% per year in interest. It’s fine to keep money for your daily expenses and monthly bills in a checking account, but money for mid-term savings, long-term savings and emergency funds should earn more than 1%. At the bare minimum, savings and emergency funds should be invested in a money market account. For a list of the best money market accounts, click here.
If you are saving to buy a car or a down payment for a house, you don’t want to risk losing your principal. For mid-term savings, it may take 2 – 5 years to save for a car or down payment. Since you cannot afford to lose principal, and would like a return larger than 1% annually, certificates of deposit (CD) might suffice. For example, a 1-year CD at Ally Bank pays 1.65% per year. A 2-year CD at SECU Credit Union pays 1.85% per year. A 3-year CD at Goldman Sachs Bank USA pays 2.00% per year. Rates are starting to gradually increase, so be careful about committing to too long a term. For the best CD rates in the USA, click here. Compare a 1.65% CD to a .5% savings or checking account … you have literally tripled your return! Make your money go to work for you!
Saving for long term goals like college tuition or retirement allows you to take more risks because you are saving for a goal that is more than 10 years away. Since you have time to weather the ups and downs of the market, you can invest in stocks, bonds and/or mutual funds. An excellent resource to find mutual funds in synch with your goals, visit Morningstar. For the 10 best mutual funds for retirement, click here. Over the long-term, stocks return approximately 10% per year. When evaluating mutual funds, use stocks’ historical returns as a measuring stick. The mutual fund prospectus will show performance statistics. In my opinion, mutual funds are the best investment for long-term goals such as college tuition and retirement. If you are disciplined and use dollar cost averaging to invest every month in a good mutual fund, your money will go to work for you while you relax at home in retirement!
The opinions expressed herein are solely those of the Author/WebMaster. Before taking any action, please consult your real estate, financial, and legal advisors.