What to Do With Money Other Than Savings Account

Did you know that the average interest rate for a traditional savings account in the U.S. is just 0.45% as of 2024, with some significant banks offering rates as low as 0.01%? Meanwhile, inflation in the same period has hovered around 3–4% annually, which means your money could lose purchasing power by sitting idle in a fundamental savings account gap.

This highlights why relying solely on traditional savings accounts may not be the best way to grow or preserve wealth. It’s time to explore alternatives that safeguard your hard-earned money and help it grow meaningfully. Whether you’re saving for a dream vacation, retirement, or simply better returns, there are more innovative financial strategies you can adopt.

Why Look Beyond Savings Accounts?

Traditional savings accounts might seem like a haven for your money, but they can do more harm than good regarding financial growth. Here’s why:

1. Low Interest Rates

Most savings accounts offer meager Annual Percentage Yields (APYs). For instance, a $10,000 deposit in a savings account with a 0.01% APY earns just $1 annually—hardly enough to keep up with rising living costs. Even high-interest savings accounts offered by traditional banks often max out at around 0.50% APY, significantly lagging behind other financial options.

2. Inflation’s Erosion of Value

Inflation rates, which often range between 3% and 4% annually, steadily diminish the purchasing power of money parked in low-yield savings accounts. For example, if inflation is 3% and your savings account earns only 0.01%, you lose 2.99% in real value yearly. Over time, this erosion can significantly impact your financial health.

3. Diversification Needs

Relying solely on a savings account exposes your money to a single financial product’s limitations. Diversification, spreading your money across various investment vehicles, is a critical strategy for reducing risks and improving growth. High-yield accounts, CDs, and other alternatives provide better returns and secure your money against market fluctuations and inflation.

Exploring savings account alternatives can help safeguard your money and make it work harder for you, ensuring that your financial goals are maintained and achieved.

Safe Alternatives to Savings Accounts

If traditional savings accounts aren’t delivering the growth you need, here are some safe and practical alternatives to consider:

1. Certificates of Deposit (CDs)

• Overview: CDs are time-bound deposits with fixed interest rates, often higher than standard savings accounts. They offer guaranteed returns for a set term, ranging from a few months to several years.
• Best For: Individuals who can set aside money without needing immediate access.
• Strategy Tip: Use a CD laddering strategy—investing in CDs with staggered maturity dates—to maintain liquidity while earning better returns.
• Example: A 12-month CD at a competitive online bank may offer APYs of 4.5% or higher. Compare CD rates on platforms like Bankrate.

2. High-Yield Savings Accounts

• Overview: Online banks typically offer these accounts and feature APYs as high as 4% or more, significantly outperforming traditional savings accounts.
• Why Consider: FDIC-insured up to $250,000, combining safety with better returns.
• Top Providers: Banks like Ally Bank, Marcus by Goldman Sachs, and Capital One consistently offer competitive high-yield savings options.

3. Treasury Securities

• Options: These government-backed investments include Treasury Bills (short-term), Notes (medium-term), and Bonds (long-term).
• Benefits: Treasury securities offer minimal risk, tax advantages, and insulation from market volatility.
• Explore Further: You can purchase Treasury securities directly through U.S. Treasury Direct.

4. Money Market Funds

• What They Are: These are investment funds that pool money to invest in low-risk, short-term securities like Treasury bills or corporate bonds.
• Comparison: Unlike money market deposit accounts, these funds are not FDIC-insured but generally offer higher returns.
• Best Use: Ideal for investors seeking a balance of stability and slightly higher returns.

5. Roth IRA or Traditional IRA

• Purpose: Both accounts are designed for long-term retirement savings with tax advantages, such as tax-free growth or deductions.
• Flexibility: You can invest in various securities, including stocks, bonds, and ETFs, offering diversified growth.
• Why Consider: Unlike savings accounts, these are designed to build wealth for your future, making them ideal for long-term financial planning.

---

Growth-Focused Alternatives

Consider these growth-oriented strategies to grow your money beyond savings accounts. While they may carry more risk, they also offer higher potential returns, making them ideal for long-term wealth building.

1. Exchange-traded funds (ETFs)

What They Are: ETFs are investment funds that trade on stock exchanges, similar to stocks. They pool money to invest in a diversified portfolio of assets, such as stocks, bonds, or commodities. Many ETFs track market indexes like the S&P 500.

Why Consider:

• Low Costs: Most ETFs have lower fees than mutual funds, making them cost-effective.
• Diversification: One ETF can include hundreds of securities, reducing risk.
• Flexibility: Unlike mutual funds, you can buy and sell ETFs during market hours.

Who Should Use Them: ETFs are great for long-term investors aiming for steady growth while avoiding the risks of individual stock picking.

Example: An ETF tracking the S&P 500 may offer an average annual return of 8-10% over the long term. Platforms like Vanguard or Fidelity provide excellent ETF options.

2. Stock Market Investments

Potential: Investing in individual stocks offers the highest potential returns compared to most traditional investment options, but the risks are significantly higher.

How to Start:

• Beginner-Friendly Tools: Use robo-advisors like Betterment or Wealthfront, which create portfolios tailored to your goals and risk tolerance.
• Diversify:Avoid investing all of your funds in a single stock. Consider blue-chip companies with a history of solid performance.

Risks: The stock market can be volatile. It’s essential to invest with a long-term perspective and only use money you don’t need immediately.

3. Real Estate Investments

Options:

• Rental Properties: Purchase properties to rent out, creating a steady income stream. This requires initial capital, ongoing maintenance, and tenant management.
• REITs (Real Estate Investment Trusts): These companies own income-generating properties, offering a way to invest in real estate without the hassle of property management.

Why Consider:

• One material item that frequently increases in value over time is real estate.
• REITs provide passive income through regular dividends.

Example: REITs focusing on residential or commercial properties may yield 5-8% annual returns depending on market conditions.

4. Peer-to-Peer Lending

How It Works: Peer-to-peer (P2P) lending platforms like LendingClub or Prosper allow you to lend money directly to borrowers. In return, you earn interest on the loans.

Why Consider:

• Higher returns than traditional savings accounts, often in the 5-10% range.
• A strategy for using fixed-income assets to diversify your portfolio.

Risks:

• Borrower Default: There’s always a risk that borrowers may not repay their loans.
• Lack of Liquidity: Your money may be tied up for the loan term.

Final Thoughts

Growth-focused alternatives can significantly outperform traditional savings accounts but require careful planning and risk assessment. Whether investing in ETFs, diving into real estate, or exploring P2P lending, understanding the pros and cons is crucial to making informed decisions.

Consider Reading This: Which Saving Account Will Earn You the Least Money?

How to Store Money Without a Bank

If traditional banking options don’t appeal to you, or if you want alternatives for storing and accessing money, there are several options to consider. Each method has advantages and risks, so it’s essential to understand what is best for your needs.

1. Home Safe is Essential

Here is a quick table to help you understand the different benefits and disadvantages of Home Safes:

Pros	Cons
Immediate access	Risk of theft or loss
No monthly fees	No growth due to inflation
Full control over funds	Requires a secure installation

Summary: It’s best for those who value accessibility and privacy, but it’s not a growth-oriented option. Consider using a fireproof and bolted safe.

2. Prepaid Debit Cards

Overview: Prepaid debit cards allow you to load money onto a card and use it for purchases or withdrawals without needing a traditional bank account.

Why Consider:

• Budgeting Tool: Prepaid cards are excellent for managing spending since you can only spend what’s loaded onto the card.
• Security: Funds are not linked to a bank account, minimizing risks in case of fraud.
• Wide Acceptance: Most prepaid cards are accepted wherever debit cards are used.

Pros	Cons
Great for budgeting	This may include activation fees
Widely accepted for transactions	There is no interest on stored money
Not linked to a bank account	ATM and withdrawal fees

3. Cryptocurrency Wallets

Overview: Cryptocurrencies like Bitcoin or Ethereum are a modern option for storing money digitally. They can be held in wallets, either hardware devices or software applications.

Why Consider:

• Potential for Growth: Cryptocurrencies are highly volatile but have the potential for significant returns over time.
• Decentralization: Unlike traditional currency, crypto isn’t tied to banks or governments, offering financial independence.
• Global Access: You can send or receive funds anywhere in the world without currency conversion fees.

Pros	Cons
High potential for long-term growth	Highly volatile market
Decentralized financial independence	Risk of hacking or losing access
Global access without currency fees	Requires technical understanding

4. Precious Metals

• Overview: Storing value in physical gold or silver can act as a hedge against inflation and economic uncertainty.
• Why Consider: Precious metals often retain their value during financial crises. However, they require secure storage and do not generate passive income.

5. Community Credit Unions

• Why Consider: Credit unions offer an alternative to traditional banks with low fees and competitive interest rates. While still technically a banking option, they often provide more personal service and community-oriented benefits.

6. Digital Payment Wallets

• Platforms like PayPal, Venmo, or Cash App allow you to store and use money digitally. While convenient, they are not interest-earning, and funds may not be FDIC-insured if the platform isn’t connected to a bank account.

---

Which Option Should You Choose?

For Accessibility: Home safes and prepaid debit cards are ideal.

For Growth Potential: Cryptocurrency wallets and precious metals provide better value over time.

For Digital Flexibility: Use digital wallets for quick and convenient financial transactions.

With these comparisons, you can better assess which method aligns with your financial goals. Remember to balance security, growth, and accessibility for a well-rounded strategy.

What to Do With Extra Money to Make Money

If you have extra money, don’t let it sit idle. Put it to work with these innovative strategies:

1. Start a Business

• Why It Works: A business can generate passive or active income depending on the model. It’s a way to turn your passions or skills into profit.
• How to Start: Begin small—test your idea with minimal capital. Online businesses, freelancing, or side hustles like selling handmade products on Etsy are great low-investment options.
• Success Example: Entrepreneurs like Sara Blakely, who started Spanx with $5,000, demonstrate the potential for small investments to lead to massive growth.

2. Invest in Education

• Why It Pays Off: Education can yield one of the highest returns on investment by enhancing your earning potential. A certification or degree in fields like data analysis, coding, or project management can significantly boost your income.
• How to Start: Enroll in online courses through Coursera, Udemy, or LinkedIn Learning. Consider certifications like Google’s Professional Certificates for digital skills.
• Real-Life Impact: According to research by the Georgetown University Center on Education, individuals with advanced degrees earn nearly 35% more over their lifetimes than those without.

3. Buy Precious Metals

• Why It’s Safe: Gold and silver have historically been used to hedge against inflation and economic downturns. They retain value even during uncertain times.
• How to Start: Buy from reputable dealers or invest in ETFs backed by precious metals for easier management.
• Tips for Success: Monitor market trends to buy during price dips. Be prepared for long-term holding to maximize returns.

4. Explore Dividend Stocks

• Why It’s Profitable: Dividend-paying stocks generate steady income, even during market fluctuations. Companies like Coca-Cola and Procter & Gamble have a history of consistent payouts.
• How to Start: Use online platforms like Robinhood or Charles Schwab to invest in dividend aristocrats—companies with a long track record of increasing dividends.
• Example of Returns: If you invest $10,000 in a stock yielding 4%, you can earn $400 annually while potentially benefiting from stock appreciation.

Additional Ideas for Extra Money

• Real Estate Crowdfunding: Platforms like Fundrise or RealtyMogul allow you to invest in properties with as little as $500, offering passive income from rents or appreciation.
• Peer-to-Peer Lending: Earn interest by lending to individuals or small businesses through platforms like Prosper. While it carries higher risk, it also offers higher potential returns.
• Invest in Yourself: Health and wellness investments, such as fitness or stress-management programs, improve productivity and reduce long-term medical expenses.

By diversifying your options, you can ensure that your extra money is not just stored but actively generating value for your financial future. The key is to align these strategies with your personal goals, risk tolerance, and time frame.

Factors to Consider Before Choosing an Alternative

When exploring alternatives to savings accounts, it’s crucial to evaluate various factors that will impact the effectiveness of your chosen strategy. Here are key considerations:

1. Risk Tolerance

What Does It Mean?

Risk tolerance is your ability to endure potential losses in exchange for higher returns. Some alternatives, like stock market investments and peer-to-peer lending, carry higher risks but offer more substantial returns. Others, like CDs and Treasury securities, are lower risk but offer less reward.

How to Assess It?

Ask yourself how much risk you are comfortable with. Can you afford to lose money in the short term for the chance of higher long-term returns? If not, focus on safer alternatives like Treasury bills or high-yield savings accounts.

2. Liquidity Needs

What Does It Mean?

Liquidity refers to how easily you can access your funds. Some options, like stocks or real estate, might require time to sell or liquidate, while others, like high-yield savings accounts or prepaid debit cards, offer immediate access.

How to Assess It?

Consider whether you may need access to your funds in the short term. If you expect sudden expenses, opt for liquid alternatives such as savings accounts or money market funds. If you save for long-term goals, less liquid options like CDs or stock market investments might be suitable.

3. Time Horizon

What does It mean?

The time horizon is the duration you plan to keep your money invested. The longer your time horizon, the more risk you can potentially take on since there’s time to recover from any downturns.

What Should You Do?

For short-term goals of 1–3 years, stick with safer, liquid options like high-yield savings or CDs. For long-term goals of 5+ years, you might consider investing in assets with higher potential for growth, such as stocks, ETFs, or real estate.

4. Tax Implications

What Does It Mean?

Different investment options have varying tax consequences. For instance, interest from savings accounts is taxable, while certain retirement accounts, like IRAs, offer tax advantages.

How to Assess It?

Understand the tax implications of your investment. For example, stock dividends and capital gains are taxed differently than interest earned in savings accounts. Retirement accounts like Roth IRAs allow tax-free withdrawals in the future, while traditional IRAs provide tax-deferred growth.

Consider Reading This: Can Money Disappear From Your Saving Account?

Step-by-Step Guide to Getting Started

Now that you understand what factors to consider, it’s time to take action. Follow this guide to get started on the right track:

1. Assess Your Goals

Why Is It Important?

Before making any investment, clearly define your financial goals. Are you saving for retirement, a down payment, or a big purchase? Your goals will determine which alternatives are best suited for your needs.

How to Do It?

Make a list of both short-term and long-term financial objectives. This will help you prioritize your savings and investment strategies.

2. Research Your Options

Why Is It Important?

Thorough research helps you understand each alternative’s risks, rewards, and tax implications. With many choices available, knowing the ins and outs of each option is essential.

How to Do It?

Start by reading trusted financial resources like Investopedia, Bankrate, and CNBC, which offer in-depth analyses of various savings and investment options. Compare interest rates, fees, and terms to ensure you make an informed choice.

3. Diversify Your Portfolio

Why is it important?

Diversifying helps you spread risk across different assets, reducing the impact of market fluctuations on your overall portfolio.

How to Do It?

Invest in safer options (e.g., high-yield savings or Treasury bills) and higher-risk, higher-reward assets (e.g., ETFs, stocks, or real estate). The goal is to balance the risk and return according to your financial goals and risk tolerance.

4. Monitor and Adjust

Why is it important?

Financial markets and personal circumstances can change, so monitoring your investments and adjusting your strategies is essential.

How to Do It?

Set a schedule to review your investments, such as quarterly or annually. If you’re investing in stocks, check your portfolio’s performance and rebalance if needed. For alternative savings options, like CDs or Treasury securities, stay updated on interest rate changes or new opportunities.

By following these steps, you’ll be well on your way to making more thoughtful, informed financial decisions that help your money grow while aligning with your goals. Stay proactive and adjust as necessary to keep your finances on track.

Conclusion

While offering safety, savings accounts often fail to provide significant growth for your wealth due to their low interest rates and the effects of inflation. Exploring alternatives like high-yield savings accounts, CDs, Treasury securities, ETFs, and real estate investments allows your money to work harder for you. Whether you’re saving for retirement, a significant purchase, or simply want to grow your savings, diversifying your investments is crucial to achieving your financial goals.

Take action today by reviewing your options and aligning them with your financial priorities. A strategic, informed approach will help you protect your wealth and maximize its growth. 

Frequently Asked Questions