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Can you believe the IRS just got hacked? After all the scandals they have had, it is not a pretty picture. What if something like this happened to a bank or company you had invested in?
Ultimately there are plenty of investments you can make out there, but only some of them are actually guaranteed not to lose you money. Depending on where you’re at financially you might choose a mixture in the hopes to dramatically increase your finances, or you might stick with some of these for a sense of safety. Here are some basic principles of investing safety that you need to know to keep your money safe at all times no matter what happens.
#1) Use an FDIC-Insured Savings Account
Ideally, some of the money that you invest should be in risk free government securities that are guaranteed by the government. One way of doing this is keeping a traditional savings account. The money also stays readily available in a savings account, so you can reach it easily if you need to. (Or empty an account quickly.) There are a lot of options when it comes to savings accounts so you can usually find one with a pretty good interest rate.
Make sure that it is FDIC-insured which will guarantee your money up to a quarter million dollars, in the case that something happened to the bank. Ultimately, having money as cash in a guaranteed situation is the safest way to keep your money. (Although it won’t necessarily make the most interest in return.)
A savings bond is another guaranteed option. Fixed rate bonds are sold at half their value which you can cash in on if you keep your money there until it mature. Interest based bonds change with the current interest rate.
#2) Money Market Accounts
Like a savings account, a money market account is insured against bank failure. The main difference is that there might be more restrictions on accessing the money and minimum deposit amounts. It can be less convenient to use than a normal savings account, but in return they usually have higher interest rates. So if you’re comfortable leaving your money for a period of time it can be a safe way to earn some interest.
#3) High-Yield Checking Accounts
Most checking accounts don’t offer an interest and might even charge fees instead, but high-yield checking accounts do the opposite. They are not quite as easy to work with however since they will have more limitations in place than a normal checking account. If you don’t mind putting in a little extra work however, they can be an excellent way to make more money on the cash you normally keep in a checking account.
#4) Certificate of Deposit
A certificate of deposit (also called CD) is something where you purchase a CD for a certain amount, and then you earn a fixed interest on it when it reaches it’s maturity date. This could be something like getting $100 extra back when you purchase a $1,000 CD. You can’t withdraw the money before it’s mature without getting charged, but if you have the cash to put away CD’s are very low risk and can make you a decent amount of interest for not doing much.
#5) U.S. Savings Bonds
Savings bonds are backed by the government and usually have pretty good interest rates. Interest on savings bonds also compound partway through the year, which means that you might be able to make more interest than with something like a corporate bond. You might also be able to get some tax benefits while you have money in U.S. savings bonds.
Savings bonds might also be protected by some inflation. They’re good for anyone who has some money to put away for a few years at a time, but there are limits to how much money you can put into a savings bond in a year. For that reason they are good for building up a savings, but if you have a lot of money already they are not necessarily the best way to grow it substantially.
Are you looking for some safer places to put your money while still making great investments? Let us know if you have had good luck with any of these options!