Something that always irked me was the idea of my money just sitting in a bank account doing absolutely nothing. Before the Great Recession, a savings account and a few CDs (certificate of deposit) was a solid investment strategy for a college age kid.
Over the past few years since the recession, interest rates have been at historic lows. This makes a regular savings account great for banks, but a crummy way for you to make money. Even with high rates, inflation eats away at your earnings.
This is why storing your money in a bank can be a horrible way of growing your income, and why you need to make your money work for you!
Money, like any paper, is only good when it’s used.”
– Grant Cardone
Use a High Yield Savings Account for Your Emergency Fund
Yes, this goes against my first point. Savings accounts stink for making money. However, wise money people should have 6 to 9 months of savings for emergencies. Imagine losing a job, your car breaking down, medical expenses that need to be paid, etc. The list goes on for why it’s a good idea to have an emergency fund.
While your local bank makes it easy to open a savings account, you’re probably not getting a great deal. Many banks will only give you 0.10% APY (annual percentage yield). That’s if you invest at least $10,000 with them too!
Instead, opt for a high yield savings account. These banks are typically online based, but offer 3% APY or more (updated 3/15/2023). Banks like Ally and Goldman Sachs provide very competitive APYs. If you need to store your money for a rainy day, a high yield savings account is one of the best ways to do it.
Tap Into an IRA (Individual Retirement Savings)
With so many Americans becoming their own employer, 401k’s might not be an option for you. Even if you have a 401k (and you’re maxing out your company match), an IRA can be a great option for building wealth.
IRA’s provide tax advantages, and can provide investors with an opportunity to grow their money. This retirement account can be used in a variety of ways, and also hold a variety of assets. From gold to individual stocks, IRA’s can provide investors with flexibility that they need.
Most investors will want to use an IRA to buy mutual funds or ETFs (exchange-traded funs) with low expense ratios. Funds can help you diversify your portfolio instantly, and many online brokerages provide data to help you make wise decisions.
Start Investing in Dividend Stocks
Are you a more hands on kind of person? You can use apps like Robinhood or other online brokerages to build an investment portfolio with dividend stocks in mind. A dividend is a portion of earnings and is paid to an investor from the company. Shareholders are typically paid quarterly (four times a year), but twice a year payments are also popular.
Dividends are typically paid by companies with healthy cashflow. Most investors take this as a sign of health (although this isn’t always true).
If you’re receiving dividends as a shareholder, you’re getting cash. This payment is ideally used to reinvest into one of these 5 tips as well to keep the cashflow rolling!
Take Your Extra Money and Start a Business
Have you been bit by the entrepreneur bug? Make your money work for you by working for more money! If you have the skill and the drive, building your own business can have a significant impact on your personal wealth. In fact, 62% of billionaires today are self made.
Starting your own business isn’t as risky as it used to be, and there are hundreds of ways to make money today. From creating a catering business, to flipping finds on eBay, there are plenty of ways to take the money you’ve already earned and grow it exponentially.
Owning a business means that you get to reap all of the rewards (and risk) of investing your cash. If you have an appetite for writing your own future, entrepreneurship might be the route for you.
Rent Out Your Rooms with Investment Properties
It can be a lot of work, but it can also generate a great deal of wealth. Whether you Airbnb your basement or decide to buy a duplex, investment properties through rental income can provide owners with monthly cashflow and forced savings.
Rental properties can be money pits or money makers, so doing the research is key. When a mortgage is on the line, it’s worth the extra reading or consulting with local professionals.
If you get it right, it can pay big. On top of the monthly income you (should) make from your renters, your property is hopefully building in value over the years as well. This can be great for long term investors, or flippers that want to graduate to larger rental properties (more units) to multiply their earnings even more.
Let us know what you think! How are you making your money work for you?
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