Blog Misc What to Do with Savings: Top 6 Ways to Grow Your Assets

What to Do with Savings: Top 6 Ways to Grow Your Assets

date January 19, 2022 time 7 min read 363 views

If you mastered the art of building your savings, then kudos to you! You have already taken the first step toward financial success. The next thing you should consider is answering what to do with my savings?

If you don’t have an awareness of why you need to save money, consider the following reasons: 

  • Savings can give you financial freedom and stability. 
  • When having money available, you do not get anxious about whether or not you have enough money to spend this month. 
  • It also gives you the freedom in what you want to do rather than being stuck in unexpected situations and being in debt because you live paycheck-to-paycheck. 
  • Being in a debt circle limits and financial burdens you from achieving your goals, which is the bad ending for your life that you do not want this to happen, don’t you?

So, have you known what to do with your money in savings? If yet, let’s go on an adventure together.

1. Open High-Yield Savings Accounts

Depositing money into a bank account is one of the most common ways people consider what to do with their savings and expect it to grow in the future with a steady interest rate. However, the national average rate for savings accounts is relatively low, only 0.06% annual percentage yield (APY).

If you want to use this method to grow your savings, pick high-yield savings accounts, which pay higher rates than standard savings accounts, roughly 20 to 25 times your investment. Considering what to do with 30k in savings, for instance, if you start with 1,5% APY, money would grow to $30,450 rather than $30,018 at only 0,06% APY.

This article will guide you the way to take your savings our of the jar and boost your returns.
This article will guide you the way to take your savings our of the jar and boost your returns. (Source: Unsplash)

How to choose the best high-interest savings accounts?

Start out by looking for banks with the highest rates, then, take a look at what it takes to get that rate. To do so, some banks require you to have a certain amount of money in your savings account while others offer a competitive rate without minimums or other requirements. Other factors to consider are deposit insurance, customer service, ATMs, the quality of mobile apps, and remote deposit features.

While there are many benefits to high yield savings accounts, there are also some downsides. You should understand the pros and cons of a high yield savings account since it will help you decide if it’s the right fit for your finances.

2. Start Funding an IRA (Individual retirement account)

If you have an early retirement goal, this could be the route for you. Why is the IRA considered as one of the greatest ways in what to do with savings?

An individual retirement account (IRA) is tax-advantaged savings account that individuals can open to save and invest in the long term. Stocks, bonds, ETFs, and mutual funds are just a few of the investments available through an IRA. Because IRAs are meant for retirement savings, taking money out before the age of 59½  results in a 10% penalty. 

There are several kinds of IRAs: traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs. The amount of money you can deposit into an IRA each year is limited by the government. Most people under 50 can contribute no more than $5,500 each year; if you are older, the maximum climbs. Traditional and Roth IRAs are available to Individual taxpayers, and small business owners and self-employed individuals can set up SEP and SIMPLE IRAs. 

However, Roth IRA income limits can change from year to year. You should be aware of them so you don’t end up with an excess Roth IRA contribution in case your earning is higher though. 

With Roth IRA, they offer a retirement account with many advantages for employees. Keeping track of the latest Roth conversion rules 2022 will help you know what to do about them and create a more reasonable retirement plan.

3. Money Market Funds (MMF)

Investing in short-term debt instruments is a good way to double your money. Money Market Funds (MMF) are open-ended mutual funds with high return potential.

If you are a risk-averse investor and are looking for what to do with 30k in savings, it is possible to choose this option. The Asset Management Company (AMC) ensures that the risks are limited, and your interests are secured. Furthermore, MMF also offers high yields when compared to other cash equivalents. 

However, it depends on the Net Asset Value (NAV), which fluctuates with the growth or decline in the unit interest rate. When the interest rate falls, the price of the money market fund unit rises, and you can get benefit from this investment plan with high returns. Besides, having the flexibility to withdraw your money from money market funds is advantageous. It allows you to get cash whenever you want.

However, the maturity period is typically less than one year, so it wouldn’t be an ideal investment tool for those aiming to start a medium to long-term investment strategy. Before using MMF, make sure you understand how they work and the risks you may face.

4. Treasury Bonds, Bills, and Notes

Treasury bonds, Treasury bills, and Treasury notes are guaranteed by the full faith and credit of the U.S. government, making them one of the safest investments in the world to help you complete your plan to save $5000 in 3 months.

Considering investing in treasury bonds, treasury bills, and treasury notes if you are a risk-averse investor.
Considering investing in treasury bonds, treasury bills, and treasury notes if you are a risk-averse investor. (Source: Unsplash)

There is a difference in maturity length between them. Treasury bonds have a 30-year maturity and offer investors the highest bi-annual interest payments. Treasury notes have a 2-to-10-year maturity with bi-annual interest payment, which is lower than Treasury bonds. Treasury bills have the shortest maturity terms (ranging from 4 weeks to a year) and be cashed in for the face value at maturity. You can purchase all in $100 increments, so choose your preferred type based on your taste.

5. Invest in Bonds

Bond funds collect money from many different investors and pool it all together for management by a fund manager. Typically, this means the fund manager uses the money to buy a diverse range of individual bonds. Investing in bond funds is even safer than owning individual bonds that can help you reach your goal to turn $1000 into $5000 stably.

Bonds are debt securities, so bondholders get paid first when a company is dissolved or goes bankrupt. Another benefit of bonds is that they offer a steady source of income by paying you a fixed amount of interest twice a year. The diversification that bonds provide to your portfolio is perhaps the most important benefit of bond investing.

Bonds are a good long-term investment option. That also is a drawback of investing in Bonds as you can lose potential earnings if an issuer offers bonds with a greater interest rate than yours.

6. Purchase Insurance

It is a smart strategy in what to do with savings that few people think about, or even if they do, they also pout for it as spending money, not investing. But have you ever thought about what will happen if you face with an unexpected situation involving your health that requires a large sum of money? Insurance can give you added protection and cushion a significant financial strain for you.

Insurance can give you added protection and cushion a significant financial strain for you.
Insurance can give you added protection and cushion a significant financial strain for you. (Source: Pixabay)

There are 2 broad types of insurance:

  • Life insurance: a contract that offers financial compensation in case of death or disability. Life insurance can help you secure your family’s financial security even after retirement or in your absence.
  • General insurance: such as home insurance, health insurance, a contract that offers financial compensation on any loss other than death. The insurance company guarantees to give you a sum assured to cover damages to your vehicle, medical treatments to cure health problems, losses due to theft or fire, or even financial problems during travel.

Before purchasing insurance, figure out what you need based on personal requirements. Then, have a comparison of the benefits of companies offered and choose a package that meets your needs.

“The only reason to save money is to invest it.” said Grant Cardone, who went from broke and in debt at 21 to self-made millionaire by 30.

Of course, investing always carries plenty of risks but it is one of the most effective ways for you in what to do with savings. As Ramit Sethi stated in his best-selling financial literacy book “I Will Teach You To Get Rich”: “The average millionaire invests 20% of their household income each year. Their wealth is measured by how well they save and invest each year, not by how much they earn.”

And… Don’t worry if you don’t have enough money.

Make money online by investing? Must have a large sum of money, be willing to invest in a gigantic project, have professional knowledge, and be willing to take big risks. And what to do with 20k in savings? Or do you have to save 100k, 500k, or 1 million in savings to be enough to invest?

Do not have any best ways to consider what to do with 20k in savings as it depends on your goals and current financial health. However, after reading this article, you certainly realize that investing is not out of reach and that you know what to do with savings. All that’s left is for you to take action and make it a reality.

Take action and invest right now to achieve your financial freedom.
Take action and invest right now to achieve your financial freedom. (Source: Pixabay)

Invest to earn more with MyConstant 

“What to do with savings?” You’ve already found the answer, haven’t you? If you want to find a trustworthy investment platform, let Myconstant accompany you. MyConstant could be an ideal component of your investment portfolio, providing you with steady returns on your terms. Our platform allows you to invest with 3 powerful tools:

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George Schooling

George Schooling

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