With summer at its peak, Mrs. Heartland on FIRE and I are stepping out for a few days for a little travel. In the meantime, the folks over at Club Thrifty offered to help with a post while we are out and about.
Don’t know much about Club Thrifty? Swing by their site and see for yourself, but in their own words: Stop spending. Start living. ClubThrifty.com helps you afford travel through sound money management, lifestyle hacks, and credit card rewards. Design the life of your dreams, travel without guilt, and have cash to spare.
Sounds good to me. Anyways, without further adieu, take it away Kate!
For kids, dropping coins into a piggy bank is a good way to start saving money. As adults, however, we need to find places where we can keep a serious stash of cash!
Sure, investing in a company retirement plan or your Roth IRA is an important piece of your financial puzzle. But maybe you’ve already maxed those out and it’s time to explore other options.
Unfortunately, stowing your money under a mattress until you’re old and gray isn’t the answer. It won’t grow, which – because of inflation – means you’re actually losing money by keeping it “safe”.
If you’re looking for a short-term investment, however, the stock market may not be your best choice, either. Because stocks are susceptible to wild short-term swings, they are usually a better long-term play.
So, what’s the happy medium between those extremes? Whether you need quick and easy access to your money or you plan to leave it invested for the long haul, here are some great stock market alternatives to consider.
Short-Term Options
We all need a place to stash some money that is safe and easily accessible. If you’re saving for a down payment on a house, for example, you don’t want those funds tied up in retirement accounts. Or, maybe you just want your emergency fund to earn more than the paltry 0.01% many banks offer on your savings.
These first three options, which are typically FDIC-insured, are better for the short-term saver. Think of them for situations when you need to get to your money immediately or for when you have a specific timeline for saving.
High-Yield Savings Accounts
These days, consumers aren’t restricted to whatever ridiculously low rate their local bank or credit union can offer. Thanks to the internet, you’ve got options!
The best online savings accounts offer super competitive interest rates for your savings – sometimes 100x better than you’ll find at traditional brick and mortar banks. These accounts provide a great balance of both investing and saving.
Be sure to check the conditions of any savings account you open. Some require a minimum starting deposit or a minimum regular monthly deposit to earn the high rates.
Of course, these accounts won’t net you the kinds of returns you might see in the stock market – but hey, it’s a heck of a lot better than earning next to nothing at all. Using a high-yield savings account to store your cash means you’ll be more prepared for life’s surprises…and for the fun events you’re planning, too!
CDs
Certificates of Deposit (CDs) are another top pick for stashing cash without worrying about the ups and downs of the stock market.
When you invest in CDs, you agree to a specific maturity date – the date when the term of the CD ends. The key with a CD is that you can’t get to the funds until it has matured (not without paying a penalty, anyway).
Say your child just received a $1,000 gift from a grandparent and you know they won’t use the funds anytime soon. You can stick that money in a CD for a year (or however long you decide) and leave the money to grow.
To find competitive CD rates, search among the many online banks like CIT Bank. Their 18-month CD typically has a great rate.
Of course, you’ll want to compare rates at various banks to find the right rate and term length to suit your needs. Be sure to deposit money for a term length that not only yields a great rate but also fits your timeline. You don’t want to get slapped with early withdrawal penalties for taking out the money because of a sudden emergency.
Money Market Accounts
Another solid option for your short-term savings or emergency fund is a money market account. Money market accounts pay interest on your deposits at a fairly high rate. Like savings accounts and CDs, they are typically insured by the FDIC for up to $250,000. market accounts are different than money market funds which are offered by brokers, so be sure you don’t confuse the two.
Unfortunately, you can’t make unlimited transactions using money market accounts. When your primary purpose is saving, however, that’s not a problem. Make your monthly deposit, take an occasional withdrawal when needed, and watch your money grow!
Money market accounts are good for anyone who wants to earn a decent rate of return without committing to a specific maturity date (like you’d be required to do with a CD). Another pro is that some money market accounts come with a debit card and the ability to write checks on a limited basis.
Long-Term Option
Here’s one last option to consider, but this one is intended for those who wish to invest their money over the long term. If you’ll need to access these funds any time soon, you’ll probably want to steer clear of this one!
Real Estate
Real estate is more of a long-term investment. In my opinion, it isn’t worth the hassle and can end up costing you a ton of money if you’re only planning to hold a property for a year or two. (I can personally attest to this, having tried to sell a house only one year after we bought it! Not a good financial plan.)
However, if you have enough money to make a down payment, have enough funds to cover any maintenance issues, and plan to keep the property as a long-term investment, real estate may be a great choice.
The goal is that you’ll earn income while you own the property through rent payments. Those payments can also be used to pay off your mortgage, so your renters will actually help you build equity. Finally, when you sell the property, you hope the property appreciated in value – in which case, you’ll make money on the sale as well.
Again, investing in the stock market has its place and should probably be a sizable portion of your portfolio. However, real estate is a way of diversifying your investments so not every dollar you have is wrapped up into your 401(k).
By choosing wisely and making savvy deals, you could find a true income property that provides you with a separate income stream from now into retirement! If you’d like to get in on the real estate game but don’t want the hassles of being a landlord, you might consider investing in crowdfunded real estate or a REIT instead.
Final Thoughts
When it comes to investing, it’s easy to forget there’s more out there than just stocks. Although the stock market is a great place to start, don’t automatically dismiss other ways to invest.
As you can see, there are some great non-stock options for stashing your cash. Whether your goal is long-term investment returns, short-term savings, or both, create a strategy that suits your financial situation and goals. Then, get to work and start investing!
Kate Underwood is a freelance writer and staff writer for Club Thrifty, a website dedicated to helping people dream big, spend less, and travel more.
