5 Alternatives to a bank savings account

If you are someone trying to save money, then the first thought that comes to your mind is opening a savings account in a nationalized bank. Everyone has a bank account and uses a saving account to protect and safeguard their earnings. However, one of the important things that people forget is that banks are vulnerable too.

Most people assume that keeping your money in a bank guarantees the safety of the money. However, this is only partially true. Major banks are also vulnerable as they are prone to fraud and shutdowns. Apart from fraud, you will also only receive a nominal interest rate, and many other options in the market will provide you with a higher interest. 

In this article, we will be discussing the places where you can keep your money safe other than banks. One thing you should understand is that risk is everywhere, and the options we provide below will also have risk, but you as an investor should scrutinize the risk percentage you are willing to take and invest accordingly.

Are Banks Vulnerable?

Banks are considered one of the safest places to keep your money, but that does not mean they are 100% safe. Banks are vulnerable to fraud, and in the worst-case scenario, they can shut down, leaving you without access to your money. In such cases, you will have to go through a lengthy legal process to get your money back, which can take months or even years.

Moreover, the interest rates offered by banks are not very high, and you end up losing money in the long run due to inflation. So, what should you do if you want to keep your money safe? The answer is simple. You need to diversify your investments and look for other options that are equally safe and offer higher returns. In the following sections, we will discuss some of the best options available in the market.

How to Protect Your Money If a Bank Shuts Down?

Before we move on to the alternative options, let’s discuss how you can protect your money in case your bank shuts down. Firstly, you should make sure that your bank has the insurance of the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA).

This ensures that your deposits are insured for up to two fifty thousand dollars per account holder. Secondly, you should diversify your investments and keep your money in multiple accounts. This way, if one bank shuts down, you will still have access to your money in other accounts. Lastly, you should keep a record of all your accounts and their balances. This will help you keep track of your money and ensure that you get your money back in case your bank shuts down.

5 Alternatives to traditional bank savings accounts

High Yield Savings Accounts

High-yield savings accounts are one of the best alternatives to traditional savings accounts. These accounts offer higher interest rates, which means you can earn more money on your savings. The interest rates offered by these accounts are usually between 0.5% to 2%, which is significantly higher than the interest rates offered by traditional savings accounts. Moreover, high-yield savings accounts are insured by the FDIC, which means your deposits are safe and secure.

One thing that you should know is that the interest rate is not fixed in these accounts and they can change at any time. So keep an eye out for the changes. Secondly, there are usually some restrictions on withdrawals, and you may have to pay a penalty if you withdraw money before a certain period. Lastly, high-yield savings accounts may require a minimum balance to open and maintain the account.

Money Market Accounts

Money market accounts are another option that you can consider. These accounts offer higher interest rates than traditional savings accounts and are also insured by the FDIC. Money market accounts are similar to savings accounts, but they usually require a higher minimum balance to open and maintain the account.

Money market accounts usually invest your money in short-term, low-risk securities such as government bonds, certificates of deposit, and commercial paper. This makes them a safe investment option. However, the interest rates offered by money market accounts are also subject to change, and there may be restrictions on withdrawals.

Certificates of Deposit (CDs)

Certificates of deposit or CDs are a type of savings account that offers a fixed interest rate for a fixed period. CDs usually have a higher interest rate than traditional savings accounts, and the longer the term, the higher the interest rate. The interest rate on CDs is fixed, which means you will earn a guaranteed return on your investment. 

CDs are insured by the FDIC, which means they are a safe investment option. You will have to keep your money locked up for the entire term, and if you withdraw your money before the term ends, you may have to pay a penalty. Another thing is that the interest rates offered by CDs are usually lower than other investment options such as stocks or mutual funds.

Treasury Securities

Treasury securities are bonds issued by the US government to finance its operations. These securities are considered one of the safest investment options as they are backed by the full faith and credit of the US government. Treasury securities come in different forms such as Treasury bills, Treasury notes, and Treasury bonds, and they have different maturities and interest rates.

Treasury securities are a safe investment option, and they offer a fixed interest rate. However, the interest rates offered by Treasury securities are usually lower than other investment options, and they may not be suitable for investors looking for high returns.

Peer-to-Peer Lending

Peer-to-peer lending is a relatively new investment option that has gained popularity in recent years. Peer-to-peer lending platforms allow individuals to lend money to other individuals or businesses in exchange for interest. This is done through an online platform that connects lenders with borrowers.

Peer-to-peer lending can be a good investment option as it offers higher returns than traditional savings accounts. However, it is also a risky investment option as there is a chance that the borrower may default on the loan. Moreover, peer-to-peer lending is not insured by the FDIC, which means your deposits are not protected.

In a nutshell,

The premise of this article is not that banks are unsafe. But people should know that banks are not the only option for keeping their money safe. There are several other alternatives available in the market that offer higher returns and are equally safe. However, it is important to remember that all investment options come with some amount of risk, and it is up to you to decide how much risk you are willing to take. Therefore, it is important to do your research and choose the investment option that best suits your needs and risk appetite. If you are interested in more such finance-related articles then check out the zeen website.

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