Monday is time to Motivate!April 27, 2020
Making the Most of Your Stimulus Check
Many Americans have already received a stimulus check from the government or should receive one within the upcoming weeks. For a lot of people, this money will be critical to their daily survival.
But what if you don’t necessarily need that money right now? Maybe you still have a solid income. Perhaps you’re living on your savings, but you’re worried it might run dry. Maybe you just want to better prepare for a potential recession or future COVID-19 shutdowns… or both. Where should you put that money to maximize its savings potential? Hint: it’s not under the mattress.
Do you know the interest you’re earning on your savings accounts? Many people don’t. And considering that some big banks only pay a measly .01%, many of us have stopped caring. Even if you had $100,000 in a traditional savings account for a full year, your earnings would amount to a depressing $10.00. So how can you maximize the interest you’re earning if you’re among those fortunate to set aside your stimulus check for later? If you’re thinking this is a great time to play in the stock market, you might as well take that money to Vegas as there are several safer options with guaranteed interest you can take advantage of first.
High Yield Savings There is absolutely nothing different from a traditional savings account versus a high yield savings account except the amount of interest you’ll earn. Many of these accounts pay 20x more than a traditional savings but may require a larger initial deposit or a minimum balance. Check to see if your bank or credit union offers one, but there are also many available from online banks. And watch out for any hidden fees as that can essentially nullify any gains. Money Market Accounts The word “market” in this account name can scare some people into assuming that is carries some sort of risk. But in truth, they have nothing to do with the stock market and are simply another type of savings account where you can earn greater interest. The typical money market account requires a larger initial deposit ($2,500 is average) and the amount of interest you earn is based on how much you have in your account. All accounts of this type have some form of tier structure, so the higher your balance, the more you earn. Another added bonus is that you can write checks from these accounts, but you’ll be restricted to six per month due to federal regulations. Funds in any money market account are entirely liquid, meaning you can withdraw them at any time. Certificates of Deposit (CDs) CDs have long been a popular mode of savings, yet younger savers are often unaware of what they are or how to incorporate them into their savings strategy. And if you don’t have one, it’s definitely a great addition to consider. With a CD, you typically have to invest a minimum of $500 to start. Then you’ll choose a term ranging from as little as 3 months or as long as 10 years. The longer term you’re willing to take, the higher the interest you’ll receive. One important note is that these funds are not liquid, meaning you can’t cash them out whenever you want. If an emergency comes up, you can “break” a CD, but there are often fees and penalties involved. And with certain banks, you won’t just lose the interest you’ve earned, but they can also reclaim a percentage of your principal investment. Ouch. Still, the CD is a great savings option for maximizing your interest rate without any risk involved. In a lot of ways, this is a good thing as you’re basically forced to not touch it until the CD comes to term. And in terms of travel, our biggest motivation for saving, a CD can be an ideal option to set aside chunks of money for a post-graduation or retirement trip. Be sure to shop around for the best rates when considering one of these options above. You can estimate how much you can earn using a savings calculator from places like bankrate.com.
As you can see, we are all about saving for the next big adventure! And as we hope you’ll discover in this weekly email series, there are infinite ways to get inspired to do just that!
PS. If you’ve already spent your stimulus money, consider this — proposed legislation may add more stimulus dollars to your pocket in the coming months with one bill recommending monthly $2,000 payouts per 16+ year old American for a certain duration. Like you, we’ll be watching this pending legislation very closely but wanted to share this for those of you who might not be aware.
Stay safe and happy exploring, Vincent and Elaine Founders, Travels and Curiosities
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