If someone told you to save money, what would you start doing? Most of you would open up a savings account and start depositing funds at regular intervals. That’s great, and you are following some smart money habits, but you could be smarter!
Savings accounts rarely give you much value in terms of interest rates. The money you put in and save will largely end up as your own money. The interest grown on top of it is very insubstantial, even over a long period. By all means, savings accounts have benefits, but they shouldn’t be the only way you save money. Instead, consider some of these smarter options:
Did you know that investing can be seen as a form of saving money? You’re not spending it on material goods, and you’re getting more money in return – if the investment goes well. There are all sorts of investment opportunities out there, from buying real estate to beginning to trade Forex, you really have a diverse list of choices. The beauty of investments is that you will gain more money from them than a savings account. If you invest in the right stocks, you can earn far more money per year than you would if you put money in your savings account. Thus, it’s a smarter form of saving as you’re gaining more money alongside what you save.
Putting money into a retirement plan is always a smart idea. For one, this will help you gain more money for retirement. This is incredibly important as you no longer have a primary source of income unless you choose to work part-time. However, working during your retirement defeats the purpose of it! Retirement plans offer far better value than savings accounts as the providers contribute money whenever you contribute money. For instance, your provider might contribute 30% of what you add to the plan. This is way better than the interest rates you get on standard savings accounts.
Certificates of deposit (CDs)
CDs are a type of savings account that differs from traditional ones. Here, you have a fixed interest rate until a fixed withdrawal date. In most cases, CDs will have much better interest rates than standard savings accounts. The caveat is that you can’t touch your money for a specific period and can only withdraw it on the specified date. However, this arguably makes them even smarter as there’s no temptation to withdraw money from your savings. Thus, if you want to save money for a fixed period and enjoy good interest over that period, a CD could be a great option for you.
Savings accounts are not bad ways of saving money. They give you somewhere to store your money safely, and you will earn a little bit of interest. However, don’t keep all of your savings in a savings account as it means your money doesn’t work as hard as it could. Instead, consider these alternative savings options for smarter saving. They can help you save even more money alongside your standard savings account.