10 places to stash your money besides a savings account

How to pick a savings account

The long-awaited interest rate hike from the Fed finally arrived on December 16, 2015. But as of May 2016, it still hasn't affected the interest rate of most savings accounts. The national average savings account interest rate currently stands at a measly 0.06%, according to data from the Federal Deposit Insurance Corporation (FDIC). And some brick-and-mortar banks are offering rates as low as a pitiful 0.01%!

There are far better places to park your hard-earning savings. Let's review 10 places to stash cash besides a traditional bank savings account.

1. Online High Yield Savings Account

With the Internet taking over pretty much everything, it's not a surprise that it has also taken over banking. By putting your funds in an online savings account, you'll have access to higher yields. As of April 2016, you can find high-interest savings accounts with yields ranging from 0.75% with the Capital One 360 Savings Account, to 1.05% with the Synchrony Bank High Yield Savings Account. Make sure to read the fine print, though, because they may require minimum deposits and limit the times you can access funds per month. (See also: 5 Best Online Savings Accounts)

2. Certificate of Deposit

By tying up your money for a longer period of time, banks and credit unions are willing to offer you a higher interest rate. With terms ranging from one to 60 months, a certificate of deposit (CD) is a financial vehicle insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per account per depositor. Certificates of deposit can easily beat that 1.10%. For example, a credit union in Honolulu, Hawaii is currently offering 16-month and 60-month CDs with a 1.20% and 1.78% APR, respectively.

3. Series I Savings Bond

Backed by the full faith and credit of the U.S. government, Series I Savings Bonds (also referred to as "I Bonds") are adjusted for inflation every six months so the purchasing power of your savings stays intact. Earnings are exempt from state and local taxes and can be entirely tax-free when used for qualifying post-secondary education expenses. I Bonds are available on small denominations starting at $50 and can be bought online via TreasuryDirect or through your tax return using Form 8888, Allocation of Refund (Including Savings Bond Purchases).

4. Gold

For a long time, several countries, including the U.S. and the U.K., committed to fix the prices of their domestic currencies in terms of the market value of a specified amount of gold. Even though the market price of gold has proven to be quite volatile, it still could work as a good way to stash your savings, depending on your timing. When it comes to gold, history has proven that it's best to buy and hold for a long time. On May 1, 2006, the price of gold per ounce was $670.30 and on April 18, 2016, it was $1,245.68. That's an 85% total return for about 10 years. This is why investors still use gold to hedge against uncertainty and inflation.

5. Exchange Traded Fund for Precious Metals

Of course, buying and selling coins, bars, or privately minted coins of gold and silver requires skill, storage space, and knowledge of the commodities market. An alternative way to put your savings in gold and silver is to buy an exchange-traded fund (ETF) that tracks the market price of those precious metals. Some examples include the iShares Silver Trust [NYSEArca: SLV], SPDR Gold Shares [NYSEArca: GLD], ETFS Physical Silver [NYSEArca: SIVR], and iShares Gold Trust [NYSEArca: IAU].

6. Lego Sets

If the investment returns from gold impress you, wait until you hear that of Lego Sets:

  • Imperial Star Destroyer was worth $249.99 in 2002 and today is worth about $2,185 (return: 774%)
  • Death Star II was worth $372 in 2005 and today is worth about $2,270 (return: 510%)
  • Taj Mahal was worth $134 in 2007 and today is worth about $2,753 (return: 1,954%)

Of course, you'll have to do some research to identify the most promising sets. With about 80 stores in the U.S., you'll have plenty of opportunities to play... ahem!... I mean, research.

7. Discount Gift Cards at Costco

Bulk buying 170 oz. detergent jugs and $4.99 roasted chickens aren't the only ways to let your dollar go the extra mile at Costco. You can stash your savings in discounted gift cards. For example, you can currently get two $50 gift cards for Buca di Beppo for $76.99 ($74.99 plus $2 for shipping and handling) at the Costco website. By planning out your purchases of discount gift cards for restaurants and other retailers, you can get a better return than that of a savings account.

8. Christmas Club

Another alternative to savings accounts is the Christmas club, which will hold money put aside for future holiday spending. Also known as Christmas savings accounts, Christmas clubs are available at over 70% of U.S. credit unions. By committing to hold your funds in the account for a predetermined period (e.g. November 1st), a credit union will pay you a higher interest rate than that of its regular savings account. The catch is that if you withdraw the funds before the deadline, you'll be charged a steep fee that nullifies all your interest gains. (See also: 9 Good Reasons to Choose a Credit Union Instead of a Bank)

9. Peer-to-Peer Lending

Banks make a profit by taking your deposits and offering those monies as loans to other individuals at a higher interest rate. You, too, can take a crack at profiting from lending through peer-to-peer lending at sites including Prosper and Lending Club. With a minimum investment of $25, you could start investing in loans with an average annual interest rates ranging from 5.23% to 9.11%. By sticking with the highest grade of investment loans, you have a good chance at beating the annual percentage yield (APY) of any savings account.

10. Secured Credit Card

While secured credit cards can be useful to building or repairing your credit history, some of these cards also allow you to gain interest on your security deposit. For example, the USAA Secured Card American Express lets you gain 0.54% per year through a two-year CD. If you're considering to apply for a secured credit card, getting one that lets you make money on your secure deposit would let you kill two birds with one stone.

What are other great places to stash away your savings?

Related: Top 4 habits of rich millennials

Top 4 money habits of rich millennials (SmartAsset)
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10 places to stash your money besides a savings account

1. They Embrace Investing

When it comes to investing, the typical millennial is reluctant to get started. A 2015 study by Capital One found that 93% of millennials are wary of investing. A general distrust of the market and a lack of basic investing knowledge were cited as the top reasons that 20-somethings are less enthusiastic than older investors.

Among rich millennials, the trend is reversed. Rather than being afraid that they'll lose money, many wealthy millennials seem to be confident that their assets will perform at the level they're expecting and that their investments will continue to gain value over time.

They're also willing to take more of a gamble when they invest. According to a report on millennial investing trends, the typical millennial holds 52% of their assets in cash. Less than two-thirds of high net worth millennials do the same. Instead, many of them veer toward riskier bets, such as private equity and hedge funds.

Photo credit: Getty

2. They Invest Based on Their Values

Whether or not it's possible to beat the market on a consistent basis is something investing experts constantly debate. Wealthy millennials, however, tend to tune out the noise and focus on investments that align with their core values.

In a study from Spectrem Group, 45% of rich millennials said they wanted to use their wealth to help others. One of the ways they're doing it is through impact investing, a philosophy that centers on investments linked to social causes.

While impact investments may not outpace the S&P 500 or the NASDAQ, wealthy millennials still see a payoff by knowing that their money is being used to help worthy causes. Over time, that consistent approach can yield better returns than constantly trying to chase the latest market trend.

Related Article: 3 Mistakes Millennial Investors Make

Photo credit: Getty

3. They Don't Overdo It With Credit

Millennials in general tend to be wary of credit cards and that's particularly true for those who have a higher net worth. According to 2013 research from the Schullman Research Center, 67% of wealthy millennials said they paid cash for their last luxury purchase instead of using plastic.

That reluctance to rely on credit means rich millennials are less likely to be bogged down by debt. That, in turn, means they have more opportunities to continue building wealth because they're not spending a big chunk of their income on debt repayment.

What's the takeaway here for the rest of us? If you're in debt, it's a good idea to make paying it down your top priority. Once it's paid off, you can use the extra money to expand your investments or bump up your savings. If you don't have debt, it's best to be selective about how often you take on credit card debt, loans or lines of credit.

Photo credit: Getty

4. They Set Financial Goals

Among rich millennials, 66% say they're focused on setting and achieving long-term goals where their investments are concerned. By thinking long term instead of getting caught up in the present, they're in a better position to stay the course even when their investments stumble temporarily.

Goal-setting is a good way to motivate yourself to make major financial changes. If you're in debt, for example, you've got a better shot at paying it off if you set concrete targets instead of making a vague pledge to get rid of it. The more specific you are, the easier it'll be to keep your eyes on the prize.

Related Article: Are Your Financial Goals Realistic?

Photo credit: Getty


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