4 Better Options Than a Bank Account for Growing Your Money

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Want to put the money in your savings to work more efficiently? These options for growing your money can help.


Key points

  • The average savings account APY is just 0.07%, which isn’t the best rate if you’re trying to grow your money.
  • Money market accounts, CDs, high-yield checking accounts, and cash management accounts often have higher rates, which could work in your favor.

For many, savings accounts are an important part of a solid financial strategy. After all, they’re often the best place to stow your money for your emergency fund — which is a necessity in case you lose your job or have a large unexpected expense pop up. But while your savings account is a useful money tool, the reality is that it’s not always the best way to grow your money.

While nearly all savings accounts offer the opportunity to earn interest on your money, the average interest rate has historically been pretty low. As of mid-May, the average savings account rate was 0.07%, which would amount to about $7 per year in interest payments if your savings account had $10,000 in it. While some banks, especially online banks, may offer slightly higher rates, they typically aren’t going to outpace inflation — especially right now.

But the good news is that you have plenty of options if you want to grow your money — and many of them are better than the bank for growing your money. If you’re looking for a solid strategy for growing your money, here are four options that can help you better than your regular savings account.

1. A high-yield money market account

Money market accounts work similarly to savings accounts, but they come with a few big perks compared to a traditional savings account. First, they typically come with a higher interest rate, and second, you’ll also get easy access to your money via checks or a debit card, which isn’t the norm with a savings account.

While rates vary, many of the best money market accounts offer an average rate of about 0.50% or higher. That is significantly higher than what you’d be offered with a traditional savings account.

For example, you’d earn about $3.50 in interest annually with the average savings account rate and a $5,000 balance. But if you put your money into a money market account with a 0.50% APY instead, you’d earn about $25 per year in interest on the same balance. That can add up quickly over time, especially compared to the interest earned on a traditional account.

The downside is that money market accounts typically require larger minimum deposits and may also have balance requirements. That’s especially true for many of the higher yield accounts, which tend to offer higher APYs. Those requirements could knock them out of the running if you’re limited on how much you can deposit up front and over time.

2. A high-yield checking account

You may not think of a checking account as a vessel for earning money on your money, but if you opt for a high-yield checking account, it certainly can be. And, if you find the right high-yield account, you can earn a lot more interest than you would if you put your money into a traditional savings account.

Many high-yield checking accounts come with certain balance and deposit requirements, but they can pay off big in return. It’s not unheard of to earn a 2% APY or higher on the money in a high-yield checking account — which is significantly higher than the average APY on a traditional savings account. It’s also about four times what you’d earn on the average money market account.

Let’s do the math. If you were to deposit $5,000 into a high-yield checking account with a 2% interest rate, you’d earn about $100 in interest your first year. If the account offers compound interest, you’d earn even more over time.

That said, you’ll probably have to meet certain requirements to get that high of an APY on a high-yield checking account. These vary from bank to bank, but it could mean carrying a high minimum balance in your account, making a certain number of deposits, or depositing a certain amount of money each month to get those higher rates.

3. Certificates of deposit

Certificates of deposit, or CDs, also work similarly to a traditional savings account. You deposit your money and that money accrues interest at a fixed rate. One of the big differences is that with a CD, you’re agreeing to leave your money in the account for a certain length of time — typically somewhere between one month and five years or more.

The other big difference is that you typically get a much higher interest rate in return — especially if you’re willing to leave your money in a CD for a longer term. While rates vary, the best CD rates are sometimes 3% or more on the money you deposit — especially with high-yield CDs. That’s higher than what you would typically earn on a money market account, a high-yield checking account, or a standard savings account.

Let’s say you were to deposit $5,000 into a CD with a five-year term and a 3% APY. You’d earn about $150 in interest the first year, and with compound interest, that amount would grow each year. That’s a pretty high return considering what the other options offer.

The trade-off is that you can’t typically touch the money in your account prior to the maturation date, which is when your term ends. Otherwise, you typically have to pay an early withdrawal penalty — which may negate any interest you’ve earned from having your money in the CD.

4. Cash management accounts

Cash management accounts are a bit different than your typical investment asset or bank account. They are generally offered by non-bank providers, like brokerage firms or fintech businesses. What makes them unique is that they function like a combination of a checking and savings account — but they aren’t bank accounts at all. Your money is managed by the cash management account provider but is held in FDIC-insured accounts with partner banks.

In return, you typically get a much higher APY than what you’d see with a traditional savings account. As with other interest-bearing options, the APYs on these accounts can vary. However, the rates can be as high as 5% or more, depending on the provider you choose. If you were to deposit $5,000 into a cash management account with a 5% APY, you’d earn an annual return of about $250 on your money. That’s huge, comparatively — which makes this type of account a great place to park your savings.

There are some downsides, though. For example, these accounts can come with high fees in some cases, and accounts with higher APYs tend to have more monthly fees, which can negate some of the earnings from interest. And you may have to meet other balance or deposit requirements. In some cases, you may also be required to have a brokerage account or another type of account as well.

The interest rates on traditional savings accounts tend to be less than stellar, but you don’t have to settle for low interest earnings on your money. There are lots of options out there to put your money to work. Your best bet is to do your homework on the accounts that may be a better fit for you.

And once you identify them, be sure to also do the math. What looks like a good deal on paper may end up being a costly one if you’re saddled with high fees or penalties. But with as many interest-bearing options as there are, you should be able to find a way to store your savings that will put your money to work for you.

These savings accounts are FDIC insured and could earn you up to 12x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you more than 12x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2022.