Supercharge Your Savings Potential

Saving money is the foundation of financial health. Having extra cash set aside can help you prepare for unexpected expenses, build up your golden-years nest egg, and achieve specific goals like purchasing a new car or home. However, the process of stockpiling funds is no longer quite so simple. The days of the proverbial piggy bank are behind us, and more programs for saving exist than ever before, which may leave you questioning which type is right for you: a high-interest-earning bank account, a retirement fund, or something else entirely.

The best solution is to do your research before funneling your money anywhere. As the saying goes, knowledge is power—and when it comes to finances, learning can even be lucrative. Check out three account types that could just help your wealth blossom faster with minimal risk.

Certificates of deposit (CDs)

Conveniently available at most banks and credit unions, these interest-bearing products could offer far greater rates of return than typical savings accounts. CDs are known for two distinct features: first, they require you to invest money for a predetermined time, ranging from a few months to several years; and second, you cannot withdraw funds within said period without a penalty. Essentially, opening such an account means loaning a sum of money to an institution, who rewards you handsomely by offering an appealing interest rate; compare Chase Bank’s respectable APYs as high as 4.00 percent on CDs to its minimal 0.01 percent returns for standard savings accounts. (These numbers are current at the time of writing but are subject to change, especially depending on your location.)

What’s more, most CDs are federally insured, so unlike buying stocks and other riskier investments, these funds generally cannot be lost. The only real gamble you make is that you won’t need them for incidentals: major home repairs, medical bills, replacing your vehicle, etc. After all, any money you choose to deposit loses its liquidity until the maturity date. However, if you’re willing to make a reasonable portion of your savings untouchable, you can reap a guaranteed return from a CD, a feature that is absent from many investment types.

High-interest checking accounts

You may not think that you can gain returns from using a checking account, but certain ones now allow you to earn where you spend. This can be useful in several ways. To start, you can accrue money from your deposited paychecks, allowing you to benefit before the money is directed elsewhere. Additionally, you can safely pad this account for easy access to funds in case of unexpected expenses without losing out on interest earnings—while still setting aside money in separate savings for your longer-term needs.

Although not every bank or credit union will offer this option, you can shop for some products that feature attractive rates. For example, as of this writing, Axos Bank advertises an APY of up to 3.30 percent on its Rewards Checking Account, while you could land one as high as 4.62 percent with an Advantage Checking Account from Presidential Bank. Just be forewarned that these interest rates are typically variable, meaning that yours could be altered occasionally. To stay abreast of these changes, regularly check your statements and any news alerts from your institution; you could also track rates of different services so you can transfer your funds to a better one if you’re unhappy with the variations.

Be mindful of the other terms as well. Some banks may charge checking-account holders convenience fees, out-of-network ATM fines, or other costs that could eat into the funds accumulated. Also, earning interest at all may depend on you meeting certain account qualifications, such as balance or monthly deposit minimums. It can be particularly tough to stay above a balance threshold if you use checking to make substantial payments (e.g., credit card or mortgage bills). That said, should you decide to open such an account and manage it appropriately, you can securely and modestly gain interest, potentially boosting your returns from holding a simple savings fund alone.

Roth IRAs

Retirement accounts are downright essential investments for just about anyone. They may typically be nonliquid like CDs, but they allow you to accrue long-term savings that you may come to depend on in the future. Roth IRAs in particular could be highly profitable due to their freedom from taxation—at least in the future. They do require you to contribute after-tax dollars, meaning that, unlike with a traditional IRA or 401(k), you can’t avoid deductions from any money you deposit into the account.

The upside, though, is tax-free growth—in other words, you get to keep all your earnings over the years. What’s more, Roth IRAs allow for withdrawals of contributions without penalty at any time and withdrawals of both contributions and earnings after you reach age 59½, granting you the freedom to access these funds as needed. (Note, though, that withdrawing earnings prior to that age or within the first five years of opening the account may result in a 10 percent tax penalty.) You can even set up an account to pass tax-free inheritances on to your loved ones after you pass.

Roth IRAs are available to all Americans of any age, so if you aren’t offered or opt out of an employee-sponsored plan like a 401(k), you can still build retirement savings with one. But remember that the sooner you invest in retirement, the better, so don’t hesitate if you feel that this option is appealing you!

A rounded portfolio

While there are many interest-earning programs available, it may be in your best interest to consider multiple approaches. A wise savings strategy features a combination of assets and accounts based on your unique needs and risk tolerance. You might decide that one or more of the above options is ideal for you, which you could then incorporate into a more diverse investment portfolio. And should you find yourself in possession of extra savings, contemplate dipping your toe into other higher-risk opportunities as well, such as building a stock portfolio, engaging in peer-to-peer lending, or purchasing real estate.

The tricky part of a full portfolio, however, is that its components are typically complex to understand and market variable, which could limit your returns or even cost you in the long run. So to protect your hard-earned money and help it grow, discuss your options with a financial professional to select a potentially lucrative plan, laying out a golden path for a brighter future.