Get Paid More to Save Safely

You know I am all for investing money you won’t need for decades in low-cost stock index mutual funds or exchange-traded funds. Over the long-term stocks tend to produce higher returns than bonds, or cash.

But I am also a huge fan of having safe savings. There is no substitute for the security of knowing you have money in the bank that will not lose value in a bear market. That can be your emergency fund, or money you plan to use in the next few years for a home down payment. Or just because you will sleep better –thus live a better life –knowing you have money in the bank.

The good news these days is that what you can earn on safe savings is rising, if you know where to look.

If your savings is sitting in a classic brick-and-mortar bank, chances are you are still earning very little interest on savings accounts or Certificates of Deposit. Old-school banks are the last to pass along higher interest rates to savers.

I want you to check out credit unions and online banks. According to the DepositAccounts website, you can now earn 2% interest on your savings at select credit unions and banks. That compares to less than 0.10%, on average, at all U.S. banks.

Same goes with Certificates of Deposit. Some online banks and credit unions are paying more than 2% interest on a one-year CD, compared to an average national rate below 0.50%. Some high yielding 5-year CDs now pay more than 3%, compared to a national average of 1.1%.

Doing some online comparison shopping for high-yielding bank accounts can be a great way to boost your guaranteed returns. Right now you could lock in a guaranteed 2 percentage point (or more) in extra interest by moving your safe savings to a high yielding account.