Where’s the Best Place to Park Your Savings?

A First Republic Bank location in Newport Beach, Calif., on May 1, 2023. (John Fredricks/The Epoch Times)

Besides under the proverbial mattress, knowing where to keep your cash can be challenging. This is especially true with the latest bank failures. Of course, you want your money to earn interest, but you also need it to be safe. And there are numerous choices.

When deciding to park your savings, it’s best to examine the landscape. It’s also important not to put all your eggs in one basket. But what account types are the best for your goals and finances?

Evaluate Account Type and Determine Goals

When determining where to deposit your savings, decide if you have short-term or long-term goals. Your decision will affect your funds and the access you have to them.

There are several factors that you should consider when looking at options. For example, will you need ongoing access to your funds? Does the account you’re considering have the following:

• online transfer
• check writing
• ATM card
• etc.

These are important considerations if you think you'll need your cash fast.

You'll also want to note any penalties for withdrawing your money. For example, is there a required time limit that the bank or fund requires?

Some accounts have higher interest than others. When looking at higher rates, do your due diligence and ensure you'll still have accessibility to your savings when you need it. There may be a required period to earn the interest. High-interest accounts may also require a minimum balance.

Look into the services offered. Are you comfortable managing your money, or do you want in-person assistance?

Once you have considered all these factors, you’re ready to start your search.

High-Yield Reward Bank Account Limited

Online banks usually offer high-yield bank accounts; some credit unions also have them available.

The online banks are backed by the Federal Deposit Insurance Corporation (FDIC) up to $250,000, just like brick-and-mortar financial institutions.

But accessing your cash can be difficult. Some accounts don’t come with an ATM card or fee-free ATM network. Instead, you must transfer your funds between accounts.

There also may be minimum or maximum balances.

Certificate of Deposit Offers Higher Interest Rates

In exchange for limited access to your money, you can go with a certificates of deposit (CD). These usually range between six months to five years. You’ll receive a higher interest rate by agreeing not to withdraw your funds for a predetermined time.

If you must withdraw your funds earlier, you must pay a penalty. If you think you need your funds earlier than the required period, this may not be the best place to keep your savings.

Money Market Deposit Accounts Offer Accessibility

Money market deposit accounts are usually offered by banks. They require a minimum deposit and balance. Another restriction is the limited number of transactions that are permitted.

Money market deposit accounts should not be confused with money market funds. Money market deposit accounts are covered by the FDIC, while money market funds are not.

Money market deposit accounts don’t earn as much interest as a CD, but your money will be more accessible.

Money Market Funds Returns for Risk

Investment companies and mutual funds offer money market funds. They’re an excellent choice for a secondary savings account.

These funds invest in short-term Treasury bills, and short-term municipal and corporate debt. The benefit is that market funds can quickly respond to interest rate changes.

While these funds are relatively safe, there is, however, an incremental risk when it comes to overinvesting in high-yield savings accounts.

Money market funds usually have a $500 minimum investment, and some have as high as a $3,000 investment. There’s generally no limit on how much you can deposit or how often you can make transactions. Your money is accessible.

The FDIC, as mentioned, does not insure money market funds.

I Bonds Lock Up Money

I bonds are issued by the U.S. government, and they are designed to protect your funds against inflation. You can buy them online, without paying a commission, in increments ranging from $50 to $10,000.

When inflation increases, the interest earned on an I bond also increases. But there’s a price for that protection and interest. You must keep your I bond for at least five years to avoid penalties.

Corporate Bonds Could Be Risky Option

A corporate bond is a debt issued by a company. Think of it as investing in an IOU. You’re loaning money to the company. The bond is issued for a specific period for a fixed rate.

Purchasing a corporate bond from a creditworthy company is safer, but doesn’t give you a high interest rate. If you are comfortable with a little risk, a less-creditworthy corporation will offer you greater returns. But if it goes bankrupt, you lose your money.

The downside to purchasing a corporate bond is paying a commission when you purchase them. Also, selling a corporate bond early may cost you.

Mix It Up and Choose Several Options

There are many factors to consider when thinking about how you will sock away your savings. The biggest factor is accessibility. How often do you want to access your funds? Although most of these suggestions are relatively low risk, your comfort zone for risk should be considered.

The best action is to divide your funds into different accounts. And be aware of the limit for FDIC deposits. If you have a financial advisor, consult with them about your options.

The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.