If you’re a good saver, and keep your spending habits in check, you’re likely well on your way to building a hefty retirement nest egg. But the question is, are you taking every possible step to make sure your hard-earned dollars are growing fast enough to meet your goals?
Wouldn’t it be nice if there were places you could deposit your money that offered an expected rate of return, and allowed you to save for your short, medium, and long-term needs? Well, you’re in luck, because these places exist and they’re readily accessible to you. Read on to learn how:
A High-Interest Savings Account for the Near Term
Saving a portion of your paycheque for emergencies is one of the pillars of living a responsible financial life, but if you’re not earning enough interest on it, you’re ultimately leaving money on the table.
Rather than relying on a payday loan to get money fast, save that option as a last resort, and hold emergency cash in a high-interest savings account that pays you at least 2% in yearly interest and allows you easy access to your funds. Instant email money transfers are a popular option if you need your money on the same day. If you’re asking yourself, how do they work?, you can click the link to find out more and better prepare yourself in the event of an unexpected expense, such as:
- Loss of employment
- Medical treatment
- Funeral costs
Bonds for the Medium Term
Bonds are loans to governments or corporations to help them further their interests. A government may embark on infrastructure projects like bridges and highways, for which they’ll need labour and raw materials. A corporation, on the other hand, may want to expand its business operations into a different industry, which will require investment in new equipment, supply chains, and professional expertise.
In exchange for your money, the institutions that received it will pay you regular interest over the length of the loan. You can either reinvest this interest into your bond or allow the cash to accumulate if you can reach your financial goals without investing it.
Bonds are convenient because they can pay you north of 3% in average yearly interest and their prices don’t fluctuate as much as stock prices do. That said, they’re riskier than a savings account because governments and corporations can fall on hard times and fail to pay you back. That’s why you should diversify and only invest in bonds with money you won’t need for the next 3-5 years.
Stocks for the Long Run
The more shares of a company’s stock you buy, the greater the percentage of your ownership stake in it. And as the company reports favorable results, its stock price will grow, as will the overall value of your investment.
While investing in a global portfolio of stocks offers an average expected return of around 7% per year, it comes with the risk of not being able to predict how any given company will fare in the future. That’s why diversification is so important and you should only invest in stocks with money you won’t need for at least five years.
Now you know how to earn between 2% and 7% more on your money than you did before reading this article. Go ahead and choose the option that suits you best and make your financial dreams come true.