Savings accounts are a safe place to keep your money because all deposits made by consumers are guaranteed by the Federal Deposit Insurance Corporation (FDIC) for bank accounts or the National Credit Union Administration (NCUA) for credit union accounts. Deposit insurance covers $250,000 per depositor, per institution, and per account ownership category. As a result, most people don't have to worry about losing their deposits if their bank or credit union becomes insolvent. If you've come into some extra money through an inheritance, a bonus at work, or made a profit selling your house, perhaps you are considering other safe options for stashing your cash, in addition to a savings account.
Safe Places to Save Your Money
Both certificates of deposit (CDs) and U.S. government securities are relatively safe places to invest your money. Both of these options will offer you some return on your money, but if your first priority is keeping your money safe, you'll likely want to prioritize a high degree of liquidity and relatively low fees above high returns.
Key Takeaways
Savings accounts are a safe place to keep your money because all deposits made by consumers are guaranteed by the FDIC for bank accounts or the NCUA for credit union accounts.
Deposit insurance for savings accounts covers $250,000 per depositor, per institution, and per account ownership category.
Certificates of deposit (CDs) issued by banks and credit unions also carry deposit insurance.
U.S. government securities–such as Treasury notes, bills, and bonds–have historically been considered extremely safe because the U.S. government has never defaulted on its debt.
Certificates of deposit (CDs) issued by banks and credit unions also carry deposit insurance. The main difference between a savings account and a CD is that a CD requires you to lock up your investment for a specified period of time, from several months to several years. CDs pay a slightly higher interest rate than savings accounts. Under typical market conditions, CDs with longer maturities pay interest at higher rates than CDs with shorter maturities. The catch is that if you want access to your money before the CD matures, you'll pay a penalty. The penalty varies depending on the issuing institution's policies but it is typically several months' worth of interest.
One strategy to further grow your earnings is called CD laddering. With CD laddering, a person may choose to open several CDs with different maturities. This strategy may offer you greater flexibility and less risk than opening one CD (with one maturity date). Having both short- and long-term CDs can also allow you to take advantage of higher interest rates without also taking on too much risk (while also having the flexibility of taking advantage of higher rates in the future).
U.S. Government Securities
The federal government offers three categories offixed-income securitiesto consumers and investors. U.S. government securities–such as Treasury notes, bills, and bonds–have historically been considered extremely safe because the U.S. government has never defaulted on its debt. Like CDs, Treasury securities typically pay interest at higher rates than savings accounts do, although it depends on the security's duration.
U.S. Treasury Bills
U.S. Treasury bills, also referred to as T-bills, are federal, short-term debt obligationswith a maturity of one year or less. The longer the maturity, the more interest the investor earns. Investors can purchase T-bills through the secondary market in a variety of different ways, such as through a broker or investment bank, or at auction on theTreasuryDirect website.
U.S. Treasury Bonds
U.S. Treasury bonds, also referred to as T-bonds, take the longest to mature ofthe three types of government-issued securities. They also pay the highest interest rates of the three types of government securities. They are offered to investors in a term of 20 or 30 years to maturity.
Investors can purchase T-bonds at monthly online auctions held directly by the U.S. Treasury; they are sold in multiples of $100. Purchasers of T-bondsreceive a fixed-interest paymentevery six months.
U.S. Treasury Notes
U.S. Treasury notes, also referred to as T-notes, are similar to T-bonds. The difference is that T-notes are offered in a wide range of terms (from two years to no longer than 10 years). While T-notes do not generate as high of a yield as T-bonds, they also generate a payment for investors twice a year (or every six months).
For all U.S. government securities, if you sell a security before it matures, you'll lose money, so it's important for investors to consider their investing timelines carefully before buying.
Advisor Insight
Mark Struthers, CFA, CFP® Sona Financial, LLC, Minneapolis, MN
"Safe" is often a misused term. Most consider U.S. government treasuries as safe, because if held to maturity, they have a guaranteed return of principal. What is often missed is that inflation can erode the purchasing power of that income stream and/or principal. Also, if you buy open-end bond mutual funds, you cannot hold them to maturity and you cannot ensure the return of principal. Depending on your age and intention, if you have a low risk tolerance and are looking for low-cost, transparent options, then I-Bonds and Treasury Inflation-Protected Securities (TIPs) are great options. If you own them individually, they can be held to maturity and the government backs the return of principal. Plus, their values/payments are adjusted for inflation.
If you want a safe place to park extra cash that often earns a higher yield than a traditional savings account, consider a money market account. Money market accounts are like savings accounts, but they typically pay more interest and may offer a limited number of checks and debit card transactions per month.
Generally, the safest places to save money include a savings account, certificate of deposit (CD) or government securities like treasury bonds and bills. Understanding your savings and investment options can help you decide the best place to park your savings.
U.S. government securities—such as Treasury notes, bills, and bonds—have historically been considered extremely safe because the U.S. government has never defaulted on its debt. Treasury securities may pay interest at higher rates than savings accounts, although it depends on the security's duration.
Cash equivalents are financial instruments that are almost as liquid as cash and are popular investments for millionaires. Examples of cash equivalents are money market mutual funds, certificates of deposit, commercial paper and Treasury bills. Some millionaires keep their cash in Treasury bills.
For savers, the most important difference is that money-market accounts are bank accounts covered by FDIC insurance up to the $250,000 limit. (If a money-market account is offered by a credit union, deposits are protected by the National Credit Union Administration.)
JPMorgan Chase, the financial institution that owns Chase Bank, topped our experts' list because it's designated as the world's most systemically important bank on the 2023 G-SIB list. This designation means it has the highest loss absorbency requirements of any bank, providing more protection against financial crisis.
In the traditional sense, checking and savings accounts are both incredibly safe places to keep your money. The National Credit Union Administration (NCUA) automatically guarantees accounts up to $250,000 for each member of a federally insured credit union.
CDs, high-yield savings accounts, and money market funds are the best places to keep your cash when it comes to interest rates. Treasury bills currently offer attractive yields at the lowest risk. Learn how they compare in terms of yield, liquidity, and guarantees.
For security purposes, money should be kept in a bolted-down safe along with any other valuables in the home, Castle Rock Investment Company's McCarty said. “Make sure the safe is fire and waterproof to avoid any damage. Make sure you deposit and replace the money on occasion so that the bills don't get too old.”
The government has no regulations on the amount of money you can legally keep in your house or even the amount of money you can legally own overall. Just, the problem with keeping so much money in one place (likely in the form of cash) — it's very vulnerable to being lost.
Upon receiving a lump sum, the immediate question is where to store it. A savings account is a common choice, offering a secure place to keep your money while earning some interest. There are several types of savings accounts designed to cater to different needs and goals.
Per Vastu, where should I keep the locker to attract money ? The Southwest Corner is the best direction to bring financial abundance to the house. A locker should never open towards the west or south.
1. Federal Bonds. The U.S. Treasury and Federal Reserve (Fed) would be more than happy to take your funds and issue you securities in return. A U.S. government bond still qualifies in most textbooks as a risk-free security.
It is better to keep your money in a bank or other financial institution, insured and secure. This is especially important if you have large amounts of money.”
Park your cash in an interest-bearing savings account
If you're still deciding how to invest your money, be sure it's stashed somewhere safe, like a certificate of deposit (CD). Deposits held at FDIC-member banks and NCUA-member credit unions are insured up to $250,000 per depositor, per financial institution.
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