You should also think about your risk tolerance when you're investing. Many have historically strong returns, and they're among the most affordable investments out there. An index fund is a bundle of stocks you purchase together, and it mimics the performance of a market index like the S&P 500. An index fund is a great way to do this with a single purchase. Make sure you diversify your money among at least 25 stocks in several market sectors. If you're worried, take steps to reduce your risk of investing loss. Yes, there's a chance you could lose money in the short term, but over the long term, the stock market does pretty well. Investing is usually the best home for your long-term savings because it enables you to grow your wealth at a pace that often beats inflation. You might make money, but you'll still lose buying power over time. This might be a few months for a short-term CD or several years for a long-term CD.īut there we run into the same problem we had with savings accounts. Some CDs offer slightly higher APYs than savings accounts, but in exchange, you must promise not to touch your money for a certain amount of time. Long-term CDsĬertificates of deposit (CDs) are similar to savings accounts in that they're insured against bank failure and offer an APY. But you shouldn't keep long-term savings in a savings account. You want this money somewhere accessible, where you can withdraw it at any time without fear of loss. They're great choices for your emergency fund and the money you plan to spend within the next five years. That doesn't mean savings accounts are useless, though. So, you're still going to lose buying power over time with a savings account, though it'll happen more slowly than if you kept your money in a safe deposit box. This is true even when inflation isn't at its highest rate in decades. That'd earn you $15 in a year on a $1,000 initial deposit.īut even the best high-yield savings account APYs still can't keep up with inflation. On the other hand, an online savings account might offer you 1.50% or more right now. You might only earn 0.01% with a brick-and-mortar bank account, about $0.10 on a $1,000 balance in a year. A higher APY translates to more money for you.īanks can change their APYs at any time, and how much you earn depends, in part, on the bank you choose. Another benefit is that you get a modest amount of interest on your savings, which is reflected in the account's annual percentage yield (APY). For one, your money is insured up to $250,000 per depositor per bank account type against bank failure. Savings accounts have a few things going for them that safe deposit boxes don't. By leaving your money in a safe deposit box, it's losing value slowly but steadily. Over time, inflation will continue driving up living costs, meaning you'll have to spend more dollars later to buy the same things you're buying right now. You know what's not going to stay the same? How much that $5,000 will buy. The $5,000 you put into a safe deposit box will stay $5,000 forever. But you're also not making any money off of it. If you do this, you don't have to worry about anyone stealing it or your savings unexpectedly dropping in value like you would if you invested it. This one may not be all that common, but I know someone who kept a big wad of cash in a safe deposit box for years.
0 kommentar(er)
