According to the Consumer Federation of America, Consumer savers are missing out on higher interest rates because of a few widely shared misconceptions. Furthermore, 57 percent of savers are unaware of the interest rate being paid on their savings accounts, making it almost impossible to identify a higher-yielding product. Do you know the interest rate being paid on your accounts?
So what is causing savers to let interest income slip from their grasp? For one, it is all due to misinformation. Millions of savers across the U.S are wrongly informed and lack awareness of the features and yields from different saving account options. Additionally, some savers believe that the work and stress involved in switching accounts overshadows the return of investment. Little do these consumers know, the Federal Reserve Board data on American saving habits has shown that as a nation, we are leaving up to $50 billion in potential interest payments on the table every year.
While a $50 billion national loss of interest sounds monstrous, it may not be convincing enough for you to believe that by just a few percentage points to your interest, your financial future could be brightened.
So where should you start looking for higher interest yields?
Money Market Accounts
Money Market Accounts may not have the highest interest yield of all, but they are often twice as much as a traditional savings account. The account holder will be able to use the account as a savings and checking account. But, the account does come with some restrictions. A money market account does require a larger balance to be maintained in the account. There will be a limit on checks that can be written and withdrawals from the account. The interest rates earned on this account are taxable. Account holders do not have to purchase bonds as interest is earned with deposits.
Money Market Mutual Funds
These low-risk mutual funds are considered as safe as bank deposits while providing a higher yield over both savings and money market accounts. You can learn about Money Market funds here.
Certificates of Deposit
CDs can be bought through a variety of maturities ranging from three months to five years. They pay a significant higher interest than traditional savings accounts and money market accounts. The one thing to remember is that you can’t withdraw from the account early. You will encounter penalties. CD rates vary from week to week, and it is important to shop around for the best rates.
U.S Treasury Bills and Savings Bonds
The government of the United States offers a number of ways for your to improve your return without risking your savings. Check in to a series EE or I Savings bond which range from $50 to $10,000. You can learn how to obtain a savings bond and treasury bond here.
If you’re opposed to moving your money to higher-yielding accounts because of a safety concern or barrier of easy access, don’t be. Just as traditional passbook accounts, money market accounts and CDs are insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration. And U.S. Savings Bonds are fully guaranteed by the federal government.