The Federal Reserve lowered its benchmark federal funds rate on Wednesday. It’s the Fed’s third rate cut this year — and 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 much higher return if you know where to look.
Following are several ways to earn more on your savings that you may not know exist.
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 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 around 2%, if not more, even after three Fed rate cuts in less than a year.
Take for example CIT Bank, an online bank that offers an annual percentage yield (APY) of up to 1.85% 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 need millions of dollars — not even thousands — to invest in real estate. With Fundrise you can invest in the real estate market with as little as $500.
Specifically, Fundrise enables you to invest in a professionally managed, diversified portfolio of residential or commercial real estate assets. Your portfolio grows over time due to dividends, which are distributed quarterly, and the appreciation of the real estate assets.
Fundrise boasts average annualized returns since 2014 ranging from 8.76% to 12.42%. The costs associated with your portfolio generally include a 0.85% annual asset management fee and a 0.15% annual investment advisory fee.
To learn more about Fundrise, see “How to Start Investing in Real Estate With as Little as $500.” Money Talks News founder Stacy Johnson also discusses Fundrise in “2-Minute Money Manager: Should I Invest in Real Estate Through Fundrise?”
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 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.
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