As the new coronavirus, COVID-19, spread from China to the United States and dozens of other countries around the globe, threatening an economic stall-out, the U.S. Federal Reserve last week moved once again to cut interest rates. That might give the economy a bit of fuel, but it’s bad news for your money sitting in the bank.
The interest rates that banks pay on interest-bearing accounts like savings accounts rise and fall with the federal funds rate. So, after the latest Fed rate cut, the chances are good that the interest rate your bank is paying you just decreased or is about to decrease.
That doesn’t mean you have to let your money sit there and earn you next to nothing, though. Even in the midst of Fed rate cuts, you can reap a higher return if you know where to look.
Following are several ways to earn more on your savings that you may not know are out there.
One option is backed by FDIC insurance, while the others are investments and as such entail some risk.
1. Switch to a high-yield savings account
The national average interest rate among savings accounts currently is a puny 0.09%, according to the Federal Deposit Insurance Corp (FDIC). But you could earn almost 20 times as much by ditching your low-earning savings account and opening a high-interest one instead.
The best high-yield savings accounts still pay close to 2%.
Take for example CIT Bank, an online bank that offers an annual percentage yield (APY) of up to 1.75% with its Savings Builder account. That’s one of the highest interest rates available — and it’s a 100% risk-free return because deposit accounts like CIT Bank’s Savings Builder account are FDIC-insured.
2. Invest in real estate — with as little as $500
You don’t have to have millions of dollars — or even thousands — to invest in real estate. With Fundrise you can invest in the real estate market with as little as $500. In the past, this type of real estate investing was available only to the richest, but nowadays any U.S. resident over the age of 18 can invest, regardless of net worth.
With as little as $500 you can open a Fundrise Starter Portfolio. Your investment is backed by a 90-day satisfaction guarantee. If you’re not completely satisfied, Fundrise will buy back your investment. You can inspect the properties in your portfolio, and each project is acquired and managed by a team of professionals on your behalf. Fundrise boasts 8.7% to 12.4% in historical annual returns.
3. Invest effortlessly
Sit back and let Acorns, a micro-investing app, help you save and invest your spare change automatically.
The app’s service called Acorns Core rounds up your credit card purchases to the nearest dollar and invests the difference automatically.
Let’s say you spend $25.45 at the supermarket. The app will round that total up to $26 and transfer the difference (55 cents) to your Acorns account. Then, Acorns will invest your 55 cents in a diversified portfolio developed with help from Nobel Prize-winning economist Harry Markowitz.
4. Earn 5% with Worthy bonds
If you’re looking for a better return than savings accounts offer, consider skipping the bank and earn 5% by investing in Worthy bonds.
Here are the basics of how it works:
- You buy 36-month bonds from Worthy for as little as $10.
- Worthy lends the bond sale proceeds to small businesses.
- Your investment is returned plus 5% interest.
Worthy invests bond proceeds in fully secured, asset-backed small-business loans. This makes the bonds less risky than traditional secured loans and other investment types, Worthy says. Worthy bonds are also registered with the U.S. Securities and Exchange Commission.
To learn more about Worthy, check out “Earn 50 Times More on Your Savings.”
Have you tried any of these methods for boosting your return rate on your savings, or would you try them? Share your experience or thoughts by commenting below or on our Facebook page.
Kari Huus contributed to this post.
Find cheaper car insurance in just minutes
Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.
Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.