3 Ways to Earn More Interest on Your Money
When you deposit your money with a bank or other financial institution, you’re likely earning interest on your balance — which is a percentage that is paid out to you for keeping your money in that account. And that interest can continue to grow over time, also known as compound interest.
Many traditional banks and credit unions offer checking and savings accounts, but the interest rates can be begrudgingly low. According to the Federal Reserve, the national average interest rate on checking and savings accounts is 0.06% and 0.33%, respectively. It’s not even worth calculating how much you would earn — it’s that low.
At Current, we’re offering up to 4.00% APY* on our Savings Pods to help our members grow their wealth meaningfully — and it’s all done passively. This is just one of the best ways to earn interest on your money. Here are a few more ways to earn more interest on your money.
Continue saving (for now)
Interest rates are shockingly high right now as the Federal Reserve continues to push back against inflation. While it’s frustrating to see the cost of everyday necessities like food and rent go up, you can earn interest on your hard earned money to fight back.
Here’s how that works:
Let’s say you have $2,500 put away in a savings account at another bank. You’re likely earning a low interest rate that is earning you pennies per month on your cash. However, if you switch to Current that offers up to 4.00% APY, you will earn an additional $100 per year in interest.
And the more you save, the more you can earn. So while interest rates are elevated, be sure to take advantage of a higher interest rate than what most big banks are offering.
Here’s the difference of having your money in an account with a minimal interest rate versus a high-yield savings account:
Consider putting away money in certificates of deposits (CDs)
It may be shocking, but banks want and need your money to stay afloat. They will use your money to fund loans and other products to continue making a profit. But where does that money come from? It comes from consumers like you that put money away with a bank.
This includes checking and savings accounts, but that money is fluid as you can take the money out at any time. A certificate of deposit is a short-term loan that is locked away with the institution for a set period of time. They can sometimes garner a slightly higher interest rate than a savings account as the bank is guaranteed to hold the money for a set period of time.
If you’re considering using these, be sure that you won’t likely need the money in the short-term. If you pull out the funds before the end of the term, you will likely face penalties.
Start investing for the long term
Investing can be a scary word for some, but it doesn’t need to be. If you have eliminated all of your high interest debt (anything above 5%) like credit card debt, you should heavily consider starting to invest for retirement.
You can do this by putting money away in your employer-sponsored retirement plan like a 401k, or even opening your own retirement account like a Roth IRA. Each type of account has different tax benefits, so be sure to do your research before beginning to invest.
But as markets have historically returned ~10% for investors, you have a solid chance of making more compound interest on your money than you would be charged interest on your outstanding debts. This strategy is called using leverage. It’s more risky, so be sure to use caution as if things go south in your personal finances, you could be in a sticky situation.
Be sure to do your due diligence before investing as you can experience market fluctuations where the value of your stock portfolio can go up and down. But if you hold for the long term, you give yourself a chance to earn interest on your money.
*The Annual Percentage Yield ("APY") for Current Interest is variable and may change at any time. The disclosed APY is effective as of January 18, 2023. Qualifying direct deposit of more than $200 required for 4.00% APY. No minimum balance required. Must have $0.01 in Savings Pods to earn Current Interest on up to $2000 in deposits per Savings Pod up to $6000 total. Please refer to Current Interest Terms and Conditions.
Current is a financial technology company, not a bank. Banking services provided by Choice Financial Group, Member FDIC.
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