With interest rates rising and record high inflation over the past year, many consumers are looking for ways to save more money.
For those who have built up a solid nest egg, rising interest rates can present an opportunity to grow their savings through tools like high-yield money markets.
Here are tips on how to leverage the benefits of a high-yield money market and other savings tools.
What is a High Yield Money Market?
Similar to a money market account, a high-yield money market account is considered a liquid account, enabling you to access money when needed without a penalty for early withdrawals.
High-yield money markets can be a great tool for consumers who have a larger balance built up and are looking to earn a higher rate of return on their savings.
After years of low interest rates, this savings tool is making a comeback as it provides a better rate of return than a standard savings account with easy access to funds when needed.
How is a High-Yield Money Market Different from Other Savings Tools?
The difference between a high-yield money market and regular money market account is that the minimum balance required to avoid monthly fees is typically larger, with the tradeoff that your savings will earn a higher rate of return if you’re able to keep your balance above certain thresholds.
If you’ve built a large enough nest egg, choosing a high-yield money market account versus a regular money market account can enable you to take advantage of higher interest rates in the current economy.
Rates of return will vary based on the amount you have in the account, whether it is a high-yield money market or regular money market, so it is important to do your homework to see which option works best for your financial situation.
Another savings tool that has seen a resurgence in popularity as interest rates have climbed are certificates of deposits (CDs). Similar to money market and high-yield money market accounts, CDs tend to have a higher rate of return than standard savings accounts, but with a CD, your money is locked in for the term of the CD.
CDs provide a fixed rate of return, and the return rates can be higher than a money market depending on the term length and the amount you deposit, but your money will be tied up for longer and penalties can be applied for early withdrawal. CDs can provide a great opportunity to earn a higher return on your savings if you have money set aside that you know you will not need for a certain amount of time.
If you find yourself with enough saved to earn a similar rate of return with a high-yield money market, it may make more sense to choose that path if you know you will need your savings to be accessible.
Establishing a nice mix of accounts can provide opportunities to grow your savings and build toward your future after years of low interest rates. Everyone’s financial situation is unique, so if you’re unsure which savings tools would work best for you, speaking with your local banker can be a good way to do your research and set you on a path to earning money from your savings.
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