When Saving Weigh Safety, Liquidity, Yield

June 16, 2009
By Kevin Cafferty

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The savings rate in America, which was about zero just a few years ago, is now exceeding 5 percent, according to the federal Bureau of Economic Analysis.

As the Pittsburgh Post-Gazette says:

But now that we're finally saving more, savings account rates are close to record lows. Bank savings accounts and money market funds are yielding below 1 percent. Even a bank CD for one year pays only about a measly 1 percent.

The Post-Gazette's claim is true if you're looking for cd rates or savings accounts in your backyard or neighborhood. However, with the advent of the Internet there are new ways and avenues to maximize the return on your savings. Paying down debt and building up a savings cushion for emergencies is one of the best things you can do no matter what the economic conditions, but you shouldn't have to settle for interest rates with a low yield while waiting to see which direction interest rates are headed.

MoneyAisle.com was designed to help you get better rates on your savings through FDIC-insured accounts. Check out our rates for yourself by running a live rate auction on the site and compare it to the 1% yields listed above.

When opening a savings account consider the following criteria:

Safety:

High-Yield bonds may get you a higher return, but they invest in corporations with poor credit ratings. And some analysts believe that many may go belly up this year. FDIC-insured accounts are insured up to $250,000 per depositor per institution.

Liquidity

If you're saving for emergencies you may need to get to your cash quickly. Most CDs have a penalty for early withdrawal, but that doesn't mean you should forgo certificates of deposit as a means of investing entirely. CD Laddering, where you stagger your deposits across several durations, gives you access to your funds at different intervals, and can help you guard against rising interest rates.

Additionally, High-Yield Savings accounts can give you great rates while providing you with easier access to your cash.

Yield

Balancing a great rate with account safety is one of the advantages of the MoneyAisle auction system: providing the consumer with the best of both savings worlds.


What factors do you consider when saving? Do you go with a higher-yielding CD or a High-Yield Savings account which gives you quicker access to your money?

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