Are you wondering how to earn higher interest on your cash savings? Since the pandemic began, interest rates have gone way down. The Fed Funds rate was cut down to 0% in 2020 and is only now getting lifted in March 2022. As a result, earning a high interest rate on your cash is hard!
With the 10-year bond yield hovering around 2%, the most you can get on a 10-year treasury bond is around 1.88%. You can also get around 0.50-0.60% with online-only based banks such as Comenity Direct, Ally Bank, and, CIT bank.
You can also earn interest through CDs (certificate of deposits). Although the interest rates are not very high for now, they are typically slightly higher than high yield savings and money market rates.
Short-term CD rates allow you to easily build a CD step stool or a CD ladder so you’ll always get the highest possible interest rate to minimize your cash drag. I plan to open up another short-term CD in six months, and keep going from there with about 10% of my investable assets.
Alternative To Higher Interest On Your Cash Savings
The reality is, it’s very hard to get a higher interest on your cash savings. Low interest rates is one of the main reasons why risk assets like stocks and real estate have done so well as rates have dropped. Given the opportunity cost of holding risk-free cash is low, people have decided to invest more.
I suggest investing in real estate, my favorite asset to build long-term wealth. Real estate generates income, provides shelter, and is a stable asset that grows with inflation.
Here are my two favorite real estate investing platforms. I have invested $810,000 in real estate crowdfunding so far to earn a higher interest on my cash.
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most people, investing in a diversified eREIT is the way to go.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends. If you have a lot more capital, you can build you own diversified real estate portfolio.
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About the Author: Sam began investing his own money ever since he opened an online brokerage account in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at two of the leading financial service firms in the world.
During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate. He also became Series 7 and Series 63 registered. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $200,000 a year in passive income. He spends time playing tennis, hanging out with family, consulting for leading fintech companies and writing online to help others achieve financial freedom.
FinancialSamurai.com was started in 2009 and is one of the most trusted personal finance sites today with over 1.5 million organic pageviews a month. Financial Samurai has been featured in top publications such as the LA Times, The Chicago Tribune, Bloomberg and The Wall Street Journal.
* The rates listed above are based on those at the time of publication and are subject to change.