Saving money is a necessary part of life, but where we choose to store that money can significantly affect how much it grows, or worse, shrinks over time. I’ve spent quite a bit of time researching and thinking about all the different options out there for keeping savings, especially when the same old savings account isn’t cutting it anymore. It’s fascinating to see how many different avenues exist for making the most of your hard-earned dollars while balancing security with potential returns.
Of course, some of these options may feel a little intimidating at first glance, but the reality is, by diversifying your savings, you’re protecting yourself from unexpected economic shifts. A savings account that offers barely any interest might feel “safe,” but is it really safe if inflation outpaces your earnings? And, let’s be honest, how many of us have cash just sitting there that could be working a little harder for us?
This isn’t about taking wild risks or chasing the next big thing, it’s about finding a variety of places to park your money so it can work for you. From traditional options like CDs to newer avenues like cryptocurrencies, there are countless ways to spread out your savings in a way that maximizes both safety and growth. Here are 16 ways you can start diversifying your savings today.
1. High-Yield Savings Accounts
If your savings account is barely earning interest, you’re missing out. High-yield savings accounts offer significantly higher interest rates than standard savings accounts, helping your money grow faster with very little risk. These accounts are typically available from online banks, which can afford to offer better rates because they don’t have the overhead costs of physical branches.
They’re also just as easy to access as a regular savings account, making them a great option for emergency funds or short-term savings goals. While rates fluctuate, it’s still one of the simplest ways to earn more without changing much about how you handle your savings.
2. Certificates of Deposit (CDs)
A CD can be a solid choice if you have a chunk of money you can set aside for a specific period. Banks and credit unions offer these with terms that range from a few months to several years. In return for locking in your money, CDs offer higher interest rates than savings accounts.
The trade-off is that you can’t touch the money without paying a penalty until the term is up. However, if you’re saving for a big purchase or just want a guaranteed return, CDs provide a predictable, low-risk way to earn more interest.
3. Money Market Accounts
A money market account is like a savings account but with some checking account features, such as the ability to write checks or use a debit card. These accounts usually offer better interest rates than traditional savings accounts but require higher minimum balances.
If you have a significant amount of savings you don’t need to access frequently, a money market account can offer a convenient blend of liquidity and higher interest earnings. Just be mindful of the transaction limits that often come with these accounts.
4. Treasury Bonds
If you’re looking for safety, U.S. Treasury bonds are about as safe as you can get. These are government-backed bonds that pay a fixed interest rate over a set period. They’re a great option if you want a secure place to store your savings and are okay with leaving the money untouched for a while.
Treasury bonds come in various maturities, from short-term notes to 30-year bonds, offering flexibility depending on how long you can leave the money invested. Plus, they can provide a stable source of income, especially if you’re near retirement.
5. Municipal Bonds
Municipal bonds, or “munis,” are issued by state or local governments to fund public projects like highways, schools, or parks. The big advantage? The interest earned is often exempt from federal taxes, and sometimes state and local taxes too, making these bonds especially attractive for those in higher tax brackets.
If you’re looking for a relatively safe investment with some tax benefits, municipal bonds are worth considering, especially if you live in a high-tax state.
6. Roth IRA
Roth IRAs aren’t just for retirement savings, they can also be a flexible place to grow savings tax-free. With a Roth, you contribute post-tax dollars, meaning you can withdraw contributions (but not earnings) without penalties anytime.
It’s ideal if you’re looking for long-term growth and flexibility, as your money can grow tax-free, and you won’t face any taxes on withdrawals during retirement. Plus, if an emergency arises, you can pull out what you’ve put in without extra fees.
7. Traditional IRA
A traditional IRA offers a different tax advantage compared to a Roth. Contributions to a traditional IRA are tax-deductible, which means they reduce your taxable income now, but you’ll pay taxes on withdrawals in retirement.
If you expect to be in a lower tax bracket in retirement than you are now, a traditional IRA could be the better option. It’s a solid choice for long-term savings that grow tax-deferred.
8. Health Savings Account (HSA)
If you have a high-deductible health plan, an HSA can be an incredibly valuable tool, not just for covering medical expenses but also as a long-term savings vehicle. Contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified medical expenses aren’t taxed either.
While it’s primarily a healthcare savings tool, many people also use it as a way to boost their retirement savings. After age 65, you can withdraw funds for non-medical expenses without penalty (though you’ll pay income taxes).
9. Brokerage Accounts
For those looking for more control over their investments, a brokerage account offers the freedom to buy and sell stocks, bonds, mutual funds, and ETFs. Unlike retirement accounts, there are no limits on contributions or penalties for withdrawing money.
It’s a more hands-on way to grow your savings, but with that freedom comes greater risk. Still, if you’re comfortable with the ups and downs of the market, a brokerage account can be a powerful tool to diversify your savings.
10. Peer-to-Peer Lending
Peer-to-peer lending platforms allow you to act as a lender, offering loans to individuals or small businesses in exchange for interest payments. It’s a higher-risk strategy, but the returns can be higher than traditional savings vehicles.
While there’s always a risk that borrowers could default, many platforms offer ways to mitigate this risk by spreading your investment across multiple loans. If you’re looking for a way to diversify with some risk, this might be a path worth exploring.
11. Real Estate Crowdfunding
Want to invest in real estate but don’t have the capital to buy property outright? Real estate crowdfunding platforms let you invest small amounts into larger real estate projects. You own a fraction of a property and earn returns based on its performance.
This can provide passive income through rental or commercial properties without the hassle of being a landlord. It’s a good way to diversify into real estate without the full financial commitment.
12. Precious Metals
Gold and silver have long been considered a hedge against economic downturns and inflation. While they don’t offer interest or dividends, their value can rise in uncertain economic times, providing a store of wealth when other investments might be losing value.
Diversifying a portion of your savings into precious metals can offer long-term protection against market volatility, though it’s essential to approach this option with caution due to fluctuating values.
13. Cryptocurrency
Investing in cryptocurrency is a more speculative option, but it has become increasingly popular as a way to diversify savings. While highly volatile, cryptocurrencies like Bitcoin and Ethereum offer the potential for high returns over time, especially as more industries and governments begin to accept them as legitimate assets.
Cryptocurrency is risky, so it’s wise to invest only a small portion of your savings here, but for those with a higher risk tolerance, it can be an exciting addition to a diverse portfolio.
14. Real Estate Investment Trusts (REITs)
REITs are a way to invest in real estate without having to buy or manage properties directly. They allow you to pool your money with other investors to buy a portfolio of real estate properties, and in return, you earn a share of the income produced by those properties. It’s a great way to diversify into real estate with lower upfront costs than buying property yourself.
Since REITs are publicly traded like stocks, they offer liquidity, meaning you can buy and sell shares easily. For those looking to diversify into real estate but without the hassle of ownership, REITs can be a good middle ground.
15. Commodities
Investing in commodities like oil, natural gas, or agricultural products can provide a hedge against inflation and market volatility. Unlike stocks or bonds, commodities tend to perform well when traditional assets are underperforming, making them a good diversifier.
However, commodity prices can be volatile, so it’s important to keep your investment in this category relatively small unless you have a deep understanding of the market. Still, for those looking to protect against inflation or economic uncertainty, commodities can be a valuable addition to a diversified savings strategy.
16. Foreign Currency Accounts
If you’re concerned about the U.S. dollar’s stability, a foreign currency account might be worth considering. These accounts allow you to hold money in currencies like the euro, yen, or British pound, giving you exposure to the global economy.
While currency values fluctuate, holding foreign currency can offer protection if the dollar weakens. It’s a bit more complex than traditional savings, but for those who want international diversification, this could be an interesting route to explore.
15 Strategies for Making Easy Money, Even While You Sleep
We all wish to have more money to spend on what we love most. But let’s be honest; not all of us want to put in the extra effort and hard work to make it. Most of us are already working hard and stretched thin. There are only so many hours in the day, and we all need time to relax and recharge. So how do we make more without taking up another part-time or full-time job?
15 Strategies for Making Easy Money, Even While You Sleep
13 Real Ways for Someone to Earn Passive Income
Here’s the thing: passive income isn’t a get-rich-quick scheme. It usually takes some effort upfront to get things rolling, and “passive” doesn’t always mean zero work. However, building a source of passive income can pave the way for greater financial freedom and flexibility in the long run.
13 Real Ways for Someone to Earn Passive Income
15 Things Dave Ramsey Has All Wrong
Dave Ramsey is a household name for managing personal finances—his advice centers around living debt-free and building wealth sensibly. As much as we admire his financial wisdom, there are areas where his advice may not fit everyone’s economic situation (like any financial guru).
15 Things Dave Ramsey Has All Wrong
With an honors degree in financial engineering, Omega Ukama deeply understands finance. Before pursuing journalism, he honed his skills at a private equity firm, giving him invaluable real-world experience. This combination of financial literacy and journalistic flair allows him to translate complex financial matters into clear and concise insights for his readers.
With an honors degree in financial engineering, Omega Ukama deeply understands finance. Before pursuing journalism, he honed his skills at a private equity firm, giving him invaluable real-world experience. This combination of financial literacy and journalistic flair allows him to translate complex financial matters into clear and concise insights for his readers.
