Is It Possible to Earn Interest On Your Money These Days? Maybe.

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Updated on Monday, May 23, 2016

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When it comes to earning interest on your cash, for the most part you won’t get a whole lot of return without involving yourself in at least a little (and sometimes a lot) of risk. The question then becomes — just how much risk are you willing to take … and is it smart to do so?

Unfortunately, these days you’ll be hard-pressed to find a product that will provide you with a large return on your investment, whether there’s a large amount of risk involved or not. The following are some ways you may be able to grow your money, along with what type of return you could be looking at and how much risk you’ll need to be willing to take.

Remember — always do your research before investing your money, and depending on where you decide to put your cash, you may need to be willing to part with it for many years in order to reap the rewards.

Option 1: A high-yield checking account

Risk: Low
Yield potential: Low
The facts: If you’re interested in earning interest on your money, a checking account really isn’t where you’ll find the biggest rewards, but you’re also not going to find any risk, since a checking account with your bank will be FDIC insured. In actuality, it’s probably not worth wasting your time trying to earn money with a checking account, since most that offer interest ask for higher deposits to start off with, and the amount you’ll end up paying is almost never worth it. Still, if you’re interested in earning some extra money while your cash sits around, check out this link to compare checking account options.


Option 2: A high-yield savings account

Risk: Low
Yield potential: Low
The facts: Although interest potential is low for a high-yield savings account as well, you should be able to find a savings account that will provide you with higher dividends then you’d find with a traditional checking account. A couple things you’ll want to keep in mind when looking for a good savings account are that you stick within the realms of your account being FDIC insured (all US bank deposits are insured up to $250,000; if you deposit more, then open accounts at multiple banks not multiple accounts at one bank), that the interest compounds daily and that you follow the rules for withdrawals so as to not get caught paying extra fees. Check out this link for some smart savings account options.


Option 3: A myRA account

Risk: Low
Yield potential: Low
The facts: Traditionally this type of account has only been available to government employees, but in 2015 it was made available to the general public, as well. Any money you put into your myRA has a guaranteed rate of return backed by the Federal Government, so your risk is low, and you’ll can earn interest at rates more than double what you’ll find with even the best savings accounts these days (last years’ rate of return, for example, was 2.31%). As far as investments go, however, you’ll be able to find accounts that traditionally yield higher interest, but you’ll be starting to get into riskier territory. However, you may not be eligible based on your income. Click here for more information about the myRA.

Option 4: Treasury bonds

Risk: Low
Yield potential: Low
The facts: A treasury bond is a fixed-interest government bond issued by the U.S. Treasury, traditionally with a maturity of over 10 years. There are a few different ways of expressing how much a bond might return, but in general, the total return on a bond will include all the money its holder earns off the bond, to include annual interest and the gain or loss in market value, if there was any. In other words, when it comes to bonds, if you’re looking for a low-risk investment on money that you can hold off on cashing in on for at least 10-30 years, then treasury bonds might be worthwhile. You can click here for the average interest rates on bonds based on the month. (For example, returns in April on Treasury Bonds were at 4.543%.) 

Option 5: Lending Club

Risk: High
Yield potential: High
The facts: With median returns hanging out around 6.9%, you might think dipping your feet into funding people’s loans on Lending Club is a smart idea, but there’s plenty to consider before doing so. For starters, there’s no secondary market, says Nick Clements, a former banker and MagnifyMoney co-founder. “Once you buy a loan, you have to hold it until term,” he said. “There is limited performance data, too — losses will accelerate in a credit cycle or downturn, and it’s not clear how well the assets will perform.” In addition, you’d generally need to invest in at least 100 notes to get decent diversification, and you should probably invest even more if you expect high returns. 

Option 6: Index funds that target High Dividend Yields

Risk: High
Yield potential: Medium
The facts: Any time you invest your money in the market, you’ll be looking at dealing with the volatility that comes with those types of moves. Where there’s market risk, says Clements, you need to be willing to accept the fact that the price of your shares might decline. “You also need to be aware of dividend payouts,” Clements added. “In other words the company can reduce or eliminate the dividend at any time.” If you do decide to go this route, though, you could be looking at high dividend SEC yields of 3.17%.

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