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Savings accounts are not the only option for Safe Saving [guest post]

Everyone wants a safe place to save their money, but if safety was your only priority, you may be tempted to just start a stash under your bed.

Piggy BankInstead, we all want our savings to be safe from a bank collapse and financial disasters, and we want it to be safe from inflation and from being accidentally spent when we come across something we really want. However, while there are great offers on interest rates, fees and bonuses for high interest savings accounts, a savings account is not your only option if you are looking for a safe savings product.

To choose a safe savings product:

  • Make sure your safe savings option meets your spending and savings needs as you may need access to your funds and don’t want to be penalized. Plus, if you want the option to grow your savings, then you want to be able to make deposits to your funds.
  • Go for no-fee products when possible as even seemingly small fees can eat into your savings over time.
  • Look for ease of use as you want to remove all possible obstacles in the way of your savings goals.
  • Make sure your safe savings also make a reasonable return. Look for ways to grow your investment since long term savings can be eaten away by the costs such as inflation.

Safe Savings Options

You may have used savings accounts all your life to squirrel away extra funds, but a high interest savings account is no longer your only option to keep your savings safe, not to mention help them keep growing with a safe and guaranteed return. Other safe saving options open to you include:

Certificate of deposit (CD):

  • CDs give you a guaranteed return and interest rate. The interest you will earn on your savings in a CD is guaranteed and locked in for the life of the term from the moment you open the account. You can then plan on your returns and even use them to supplement your income while knowing your initial investment will never decrease.
  • The more you save the more you can earn. Putting as much of your savings into a safe certificate of deposit as possible ensures the best return as the highest interest rates are offered on the highest balances.
  • Restrict your access to help you save for long term goals. As with the highest balance attracting the highest interest rate, so too will a longer term allow you a higher CD rate. Plus, because your savings are locked away in a certificate of deposit account, you are not tempted to spend them, and they keep growing towards your goals and your future. If you do need to access your funds before the end of the term, then you will often be charged cancellation fees and suffer a reduced interest rate.

Money market deposit accounts:

  • Offer high yields. A money market deposit account can usually offer you a higher rate of interest on your savings than most CD or ordinary savings accounts.
  • Offer few withdrawals. This can often be a condition of the account to help you avoid fees, but it depends on the financial institution which holds the account as some will allow more transactions than others. Restricting your access also helps enforce your savings plan, encouraging you to keep your balance up. However, a money market deposit account is still more like a savings account than a CD as you can withdraw your funds without penalty in most cases.
  • Require a high minimum balance. If you do not meet the institution’s minimum balance requirement you will attract more fees on your money market deposit account.

Money market funds:

  • You’re investing where the banks invest. The money market is where government, banks and large businesses lend and borrow money for their short term cash needs. This makes a money market fund a safe place for your savings to be invested as you can do so through a well established and secure bank or financial institution.
  • You can earn a higher rate on your savings than in a traditional savings account. By investing in a money market fund with an investment company or bank, you can secure high returns on your savings with little risk as those borrowing from the money market usually have a high credit rating.
  • You can access your funds within days. There are generally no penalties for accessing the savings you have in a money market fund and the transfer can take a few days to be processed.

Choosing a Safe Savings Investment

High interest savings accounts – and certificate of deposits, money market deposits and money market funds – are all relatively low to no risk investments to help your savings grow until you need them. To help you choose which is the best safe savings option for you, make sure you consider:

  • Your savings and cash flow needs. If you think you may need access to some or all of your savings in the near future, choose a short term investment which will allow you access it when you need it, or choose an investment or savings account which does not penalise you for accessing your funds.
  • Shop around for the best deal on your savings and on your CDs. There are a range of CD accounts, money market deposits and fund investments available depending on the balance of your savings and the term for which you want to invest. Therefore, make sure you look at all the options available to you on your balance and for your needs because banks and investment institutions offer specials and bonuses to attract your business. So why not take advantage of those offers to help boost your savings safely?

About the Author: Alban is a personal finance writer. He offers advice on personal finance issues and helps people to compare credit cards online.

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