A lot of people make some serious sacrifices to make their money. Some of them wake up at ungodly hours to get ready for work. Some of them work throughout the night and don’t get home until the crack of dawn. Some of them sacrifice their weekends so they can work to put money on the table to support their families.
We work hard for our money.
So why don’t we allow our money to work for us?!
The average person takes their money once they earn it and put it in a checking account or a savings account.
That’s fine and dandy, but there’s one major problem:
The interest rates are pitiful.
We work hours upon hours of our time and blood, sweat, and tears into our jobs, yet the money we work so hard for does nothing for us but sit in our bank.
‘But Dylan, I earn interest on my checking account’.
Yeah, so do I. I have around 1,500 in my checking account right now, and every month, I make 1 penny in interest. So, if I live to be 100, I’ll have made $12 dollars.
The best part is when my bank informs me I have received my pitifully low interest, they say something along the lines of “you have earned your interest!”. They use an exclamation point as if they expect me to get excited about a penny.
I mean, I suppose it’s better than nothing. But that doesn’t really cut it for me.
In my opinion, there are far better options.
There are some higher interest accounts, such as Certificate of Deposits, which offer higher interest rates with very limited liquidity. Liquidity is essentially how easily you can access your money.
With accounts like this, you set a time of the certificate of deposit, and that money will be inaccessible to you until the time period is up. So, for example, you can set up a CD for 5 years, and for those 5 years, you won’t have access to that money (unless you want to pay a hefty fee). In exchange for this money being “locked away”, you will receive a much higher interest rate than a traditional savings/checking account.
However, there is one issue you must be mindful of if you choose to create one of these accounts.
Make sure you never put all of your money into a CD account. Only put a small amount of funds into your CD. The reason?
What if your car breaks down? What if you get a flat tire? Heaven forbid, what if some serious medical issue comes up?
The point is, you should always have some funds left over in case of emergency. While you may be very frugal and never spend your money, it still wouldn’t be wise to put more than 25% of your money into an account such as this. Always keep an emergency fund. Just in case.
If you’d like to do some research on the various offerings, here is a link for Bankrate.com, a website that provides a list of the current CD rates: Check Rates Here
There are numerous other ways to put your money to work. There are various investment opportunities (article of my favorite platform for this coming soon), and there’s real-estate opportunities as well as peer to peer lending. These options, although riskier than a CD or traditional bank account, often yield much higher returns.
For example, if I had my $1,500 in my investment account (which in a year, has given me a 6.42% return), I would have made $96.30 in interest, instead of the pitiful 12 cents I made in my checking account.
In my account, I only have $300.00 invested, and I have made $19.41 in interest. To put that into perspective, it would take me 162 years to make that same return with my checking account.
I think I’ve made my point.
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