High interest savings, CDs and other investments
What are your plans for the next few years? Perhaps you want to get married, buy a house, take a big vacation, or save for a rainy day. No matter the reason, there are ways to make that money grow even if you don’t have a long window to save. From high-interest checking accounts and CDs, to money market mutual funds, your options are many.
Things to consider when saving for the short term:
- Risk and return are closely linked. Low-risk ways to save generally have lower (and more reliable) interest rates, while riskier investments can have higher (and more variable) interest rates.
- Another key concern is liquidity, or ease of access to your money, especially for savings for emergencies.
- Fees can vary widely and can reduce the overall earnings from your savings.
- Some savings options, such as savings accounts, are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000. To check that your account is FDIC-insured, look for the FDIC official teller sign at your bank, or contact the FDIC.
Options for short-term savings
1. Standard savings accounts: Your deposits in these accounts are FDIC-insured, and you can easily transfer or withdraw your money from savings accounts. However, interest rates are lower than high-interest accounts.
2. High-interest checking accounts: Many banks offer checking with higher interest rates than you get with a standard savings account. These accounts are FDIC-insured and easily accessed. However, high-interest accounts may impose certain requirements, including maintaining a high minimum balance or setting a minimum number of transactions per month.
3. Bank money market deposit accounts: These accounts may offer higher interest rates than a checking or savings account, and are generally FDIC-insured. However, banks may impose minimum balances, or limit the number of transactions that can be made within a time period.
4. Certificates of Deposit (CDs): These certificates are offered on deposits that you keep with the bank for a set period. Generally, you'll receive a higher interest rate if you buy a larger or longer-term CD. But there is sometimes a fee for early withdrawal of your money, so make sure you won’t need the money before the term is up or choose a CD that offers early withdrawal without a penalty. CDs are FDIC-insured.
Savings Tip #17
A high-interest savings account or checking account may require you to keep a minimum balance, bank online, or set up direct deposit. Before you sign up, make sure it’s compatible with your preferred way of banking.
Read more about how to make the most of your savings—for example, you can set up automatic monthly transfers to a savings account. Be sure to choose how you’ll save for your short-term goals after reflecting on the interest rate, risk, liquidity, and fees of the investment options available to you.
What's next? Treating savings as an expense
Brokerage IRAs (non-FDIC insured) are available through Merrill Edge. Bank IRAs (FDIC insured) are available through Bank of America, N.A.
Merrill Edge is the marketing name for two businesses: Merrill Edge Advisory Center, which offers team-based advice and guidance brokerage services; and a self-directed online investing platform. Both are made available through Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S).
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