4 Types of Investments Better Than Your Run Of The Mill Checking Account
You've realized that keeping excess money in your checking account may not be the best option for your hard-earned wealth.
However, you may not be interested in long-term investments or want to avoid taking too much, if any, risk with your money.
So what do you do?
Below are four types of investments that probably offer a rate of return higher than your run-of-the-mill checking accounts and are widely regarded as low-risk and secure investments.
CERTIFICATES OF DEPOSIT
The local banks offer Certificates of Deposits, also called CDs. For a predetermined amount of time, the bank will take your money and pay you a competitive interest rate that you are guaranteed to get for that period of time, no matter what happens to interest rates or the bank. The FDIC insures deposit accounts up to $250,000 per depositor. Ordinary income tax on the interest you receive applies on the local, state, and federal levels.
HIGH YIELD SAVINGS ACCOUNT
High-yield savings accounts pay a competitive rate like CDs and are typically not bound by a specified amount of time, but the rate is subject to change at any time. Mostly, High yield savings I see out there are online offerings (not brick and mortar). The FDIC insures deposit accounts up to $250,000 per depositor. Again, you will pay ordinary income tax on the interest you receive on the local, state, and federal levels.
MONEY MARKET ACCOUNT
Money market accounts are utilized at banks, credit unions, and brokerage companies like Fidelity or Schwab. The rates on money markets are currently very competitive compared to CDs and high-yield savings accounts. Like high-yield, money market interest rates are subject to change. Again, you will pay ordinary income tax on the interest you receive on the local, state, and federal levels. The FDIC insures deposit accounts up to $250,000 per depositor. However, money market accounts held in brokerage companies like Fidelity and Charles Schwab may offer additional insurance, protecting a higher amount against insolvency.
US T-BILLS
You can invest in US Treasury bills (T-bills) through brokerage firms like Fidelity and Charles Schwab. T-bills have a maturity period of one year or less and are sold in $1,000 denominations. Currently, the annual interest rates for T-bills are highly competitive and can even be higher than those of certificates of deposit (CDs), high-yield savings accounts, and money market accounts. One of the other main advantages of investing in T-bills is that the interest earned on them is exempt from state and local taxes. While the value of T-bills may fluctuate, investors look to recover their principal plus interest at maturity. These bonds are backed by (don’t laugh) the good faith of the US Government.