Before we begin, let’s get one thing clear. There is no such thing as the “best” investment in the world. If you’re looking for ways to get control of your money, you’re likely going to need a combination of different tools depending on your life situation. But if you’re looking for a money magic bullet, unfortunately, it doesn’t exist.
When thinking about your money, I find it helpful to break it down into short-term, medium-term, and long-term goals. In the short-to-medium term, the current high APYs on some certificated deposits (CDs) may be right for your situation. Maybe you’re saving for a vacation or a down payment on a house. If you’re comfortable leaving that money alone and locking in a higher interest rate for the term of the CD, that’s great.
But even though today’s best CD rates are 5% or more, other investments will do better in other scenarios. Here are three investments to consider.
1. A better investment for the long term: S&P 500 ETFs
There’s a big difference between saving and investing. Savings tend to be lower risk, but also have relatively lower returns. It’s important to put money aside in a savings account or fixed deposit for cash you might need in the next few years. But what about cash you don’t plan on touching for five years or more?
Our picks for the best high-yield savings accounts for 2024
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Capital One 360 ​​Performance Savings 
Annual Interest 4.25%
Pricing Information
For the most current interest rates, visit the Capital One website. Advertised Annual Percentage Yield (APY) is subject to change and is accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening. Member FDIC. |
Annual Interest 4.25%
Pricing Information
For the most current interest rates, visit the Capital One website. Advertised Annual Percentage Yield (APY) is subject to change and is accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening. |
Minimum winnings $0 |
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American Express® High Yield Savings 
Annual Interest 4.25%
Pricing Information
As of July 2, 2024, the annual interest rate is 4.25%. Member FDIC. |
Annual Interest 4.25%
Pricing Information
As of July 2, 2024, the annual interest rate is 4.25%. |
Minimum winnings 1 dollar |
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Citizens Access® Savings 
Member FDIC. |
Minimum winnings $0.01 |
This is where investing comes in. Investing involves buying assets like stocks, ETFs, bonds, and real estate that are expected to accumulate value over time. It is risky because markets can go up and down and returns are unpredictable. However, historically, investing in the stock market has produced higher returns than savings.
For example, take the S&P 500, which tracks the performance of America’s largest companies and is often used as a benchmark for stock market performance. The index has achieved compound annual growth of more than 10% over the past 30 years. You don’t have to research individual stocks to invest: instead, you can use index funds or ETFs that track the S&P 500 to invest in a variety of companies and industries.
Even better, invest in the stock market using tax-advantaged accounts like 401(k)s and IRAs, which can help you reduce your taxes now or withdraw money tax-free in retirement.
2. A better investment if you don’t have an emergency fund: High-yield savings accounts
An emergency fund is the cornerstone of almost every financial plan. Having three to six months’ worth of living expenses saved up can give you cash to get by if you lose your job or face an unexpected expense.
When it comes to emergency savings, easy access is very important. If you put your money in a CD with a one-year term, you will usually have to pay an early withdrawal fee if you want to get your money out in a hurry. If it’s invested, you may have to sell your investments at a loss if the stock market is doing poorly.
That’s where the top high-yield savings accounts come in. Unlike CDs, you don’t have to leave your money there for a set period of time. You can still earn a high APY. But the key is that you can access your money whenever you need it.
3. If you have credit card debt, here are some investments to pay it off
If I told you about an investment opportunity that guaranteed 20% or more annual returns, you would probably think it was a scam. It’s natural to be skeptical, because investments that guarantee huge profits often sound too good to be true.
However, the Federal Reserve puts the average APR for credit cards at 22.63%. If you’re paying 20% ​​or more in interest on your credit card balance, it will eat into the gains you’ve made on your savings and investments.
Let’s say you have $5,000 to invest and an equal amount on a credit card. If you pay off the credit card first, you could end up with over $1,000 more in cash.
Scenario 1: You invest your money in an ETF that tracks the S&P 500 and pay off your debt over time.
- If you reduced your credit card payments by $150 per month, it would take you just over four years to pay off your balance, with interest costs of over $2,350.
- You can expect an average return of 8% from the S&P 500. After four years, your investment could be worth about $6,800.
Scenario 2: Pay off your credit card balance and invest the money you would have spent on interest payments.
- If you get the same 8% average return from the S&P 500, a monthly investment of $150 will add up quickly: after four years, you’ll have over $8,000 in your investment account.
Key Takeaways
Before you put your money in a CD, think about what you’ll use the cash for and when you’ll need to access it. CDs are a great short- to medium-term savings vehicle, but in the long term, the stock market will probably produce better returns. In the short term, if you have credit card balances or don’t have an emergency fund, consider prioritizing those before opening a CD.
These savings accounts are FDIC insured and can earn you 11 times the return on your bank deposits.
Many people miss out on guaranteed returns by putting their money in savings accounts at big banks that earn little to no interest. Best Online Savings Accounts You could potentially earn a return as much as 11 times the national average savings account interest rate. click here We reveal the best-in-class accounts that made it onto our short list of the best savings accounts for 2024.
