You know that saving money is an important part of living a frugal lifestyle. Indeed, it is important to build up an emergency fund so that you are prepared for a rainy day. This way, if something comes up, you will not have to go into debt to cover your expenses. Keeping your money in a traditional savings account at a brick and mortar bank can mean easier access to your funds, but it also means that your money isn’t really doing much in the way of working for you. If you want to boost your savings, it can help to look at other options.
High Yield Savings Account
Instead of using a regular savings account, which currently yield less than 0.5% in many cases, you can look into a high yield savings accounts. It is true that high yield accounts themselves are only yielding a little more than 1%, but that still represents a better return. If your money is sitting in the bank for emergency purposes, it is a good idea to do what you can to earn a little extra if possible.
Some brick and mortar banks offer high yield savings options, but you may need to have a minimum balance. If you are looking for a high yield savings account without a minimum requirement, you might consider an online bank account. There are a number of bank accounts that offer higher yields online. You will still only get a little more than 1%, but you might not have to worry about a minimum. You do, however, have to realize that access to your money will be a little more difficult. You will have to plan to wait a few days to get your money.
Emergency CD Ladder
If you have the patience to build a CD ladder, you can create one for your emergency funds. The nice thing about a CD ladder is that you can get better yields. The longer the CD term, the higher the yield. However, if you have your money locked up in a CD, you will have to pay a penalty to access it. You can create a CD ladder, using a plan that allows CDs to mature every three months, or you can create one that allows for maturation yearly (or a combination of the two).
A CD ladder is helpful because it provides a way for your to boost your savings yield, while allowing regular access to your money. Additionally, you can roll each CD over as it matures, giving you the chance to take advantage of rates as they rise. If interest rates go up, you can renew at a higher rate after your CD matures. Be careful, though, you want to have a plan for bridging the gap between an emergency and when the CD matures. Having to withdraw money from your CD early can result in a hefty penalty.
With a little planning, it is possible to boost the yield on your emergency savings, helping your money work a little bit more for you.
This post was featured in the Carnival of Wealth.
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