Exploring Options for Maximizing Savings Account

Hey Kristin, I've finally reached a point where my savings account is looking pretty healthy and my parents have suggested that I should start considering other options to ensure I'm getting the most out of it. I'm feeling a bit overwhelmed and unsure about what to do—what are my alternatives? I'm not quite ready to dive into stocks or real estate investments, which seem to be the go-to choices for people my age. Are there simpler options or types of accounts I can use to make sure my money is working for me and not just sitting idle? Sincerely, Financially Clueless

Maximizing Your Savings Account

Congratulations on building up a nice sum of money! While you didn't specify the amount, it's important to first set aside a solid emergency fund equal to three to six months' worth of expenses (six months or more is even better). Once you have that covered, you can earn more interest on the rest of your savings by looking into a high-yield savings account. These accounts offer higher interest rates, known as the annual percentage yield (APY), than traditional savings accounts and are often provided by online banks. While you may not want to transfer all your funds to this type of account, it's worth considering. Another option is a money market account, which combines features of a savings and checking account with a higher interest rate. Keep in mind that there are restrictions on the number of transactions you can make per month with a money market account. Certificates of deposit (CDs) are also a low-risk way to earn interest, with a fixed rate of return over a set period of time. Just be aware that you won't have access to your funds until the CD reaches maturity.

While I understand your concerns about investing, if you're looking to earn a substantial amount of interest, investing is the way to go. There are beginner-friendly, less risky investment options available if ETFs and index funds aren't your cup of tea. As a conservative investor, you may want to consider bond funds or balanced funds that offer low-risk opportunities to outpace inflation. It's important to remember that while these investments are low risk, there is still some level of risk involved, so it may be beneficial to seek advice from a financial professional.

It's important to note that with low risk comes low reward. If you're aiming to grow your funds significantly, you'll likely need to diversify into other investment opportunities over time. Start small and gradually expand your investment portfolio for long-term growth. Best of luck on your financial journey! -Kristin