The Best Savings Alternatives

U.S. Treasury bills are considered risk free investments.

Saving money means that you are not spending your money. While saving your hard earned money is a good idea, you may also want to accumulate wealth. Leaving your money under a mattress is the safest way of not losing your money. However, it is also the least effective way of making money. There are several methods to save and accumulate wealth with minimal risk.

Savings Accounts

A savings account at your local bank will provide you with the opportunity to earn interest. Though the interest earned will be minimal, it will still provide you a decent return. Savings accounts are also safe investments.

Certificate of Deposit

A certificate of deposit, or CD, is an investment instrument that provides you a guaranteed annual rate of interest for the duration of the investment. It is usually locked in for a specific period of time, meaning you can only withdraw your money at maturity. The advantage of a CD is that you may receive higher interest than from your savings account. The disadvantage is that you cannot withdraw funds from a CD or add to it until it matures.

Treasury Bills

Government issued securities, such as Treasury bills, are also a safe method to invest your money. Treasury securities are considered risk-free investments because they are backed by the U.S. government. One advantage of U.S. Treasury securities is that you may receive higher interest payments than you would from a CD or your savings account. Government bonds are good long-term investment vehicles for your retirement or for your kids' college education.

Mutual Funds

Mutual funds are investment pools that consist of both debt and equity instruments. Debt instruments include bonds and other fixed-income products, while equity instruments include stocks and market index linked products. A mutual fund may combine one or both of these instruments in their portfolio. Mutual fund units may be listed on stock exchanges or offered for sale to investors directly by the fund company. The advantage of a mutual fund is potentially high returns. The disadvantage is that there is more risk, meaning that you can lose money in a down market. Choose a mutual fund that fits your risk tolerance level.

References

• U.S. Securities and Exchange Commission: An Introduction to Mutual Funds
• Securities Industry and Financial Markets Association: What Are U.S. Treasury Securities?
• Visual Economics: What Are CDs?

Resources

• Consumerism Commentary: 10 Easy Ways to Save Money Without Much Effort
• U.S. Department of the Treasury