Interest money

5 Ways to Build Wealth Using a High Interest Money Market Account

Interest rates may get a lot of attention in the news, but it is for good reason.

Whenever the

Federal Reserve

sets a new target interest rate, the rates we earn and pay on variable interest accounts, like credit cards and savings accounts, will likely follow.

If you have money in savings or are working to increase your savings balances, choosing the right account is important. Among savings accounts,

money market accounts

may offer even better interest rates than regular savings.

Here are five great uses for a high interest money market account that you may want to consider.

Keep your emergency fund safe

Every person should have a financial plan for an emergency. Things like broken down cars, broken ovens and unexpected layoffs happen to people every day. Still 39% of American households couldn’t find $ 400 in savings. They would have to use the credit or sell something if they could cover the cost at all.

If you don’t have emergency funds, $ 400 should be the absolute minimum. Most people should try to keep at least three to six months of spending in an emergency fund. If you are self-employed or don’t have a stable job, you should double that for at least six to 12 months. Placing it in a high yield account keeps you interested throughout the process and protects your money with FDIC insurance coverage.

Get the best interest rates on your cash flow

The average interest rate in the United States is currently around 0.10% – yes, that’s a tenth of 1%. To some of the

biggest banks

in the country, the rate is as low as 0.01%. You can’t get close to zero without adding a new number! This interest rate is really, really low.

On the flip side, high yield accounts currently pay around 2% or more – up to 200 times more than lower paying accounts. If you are retired and want to keep a lot of cash on hand, a high yield account is perfect because it will give you the maximum return on your money with the least amount of risk.

Automatically save for multiple goals

In his book “I’ll Teach You How To Be Rich,” author Ramit Sethi showed an example of how you can automatically save for marriage, travel, and other future expenses using multiple savings accounts. If you open an account for every unique goal, you can create automatic transfers every payday that will move funds without you having to remember or lift a finger.

When you put the money in dedicated high yield money market savings accounts, you are less tempted to use the funds for anything else. And like other use cases, you get the best interest rates while keeping your money safe.

Build an investment fund

My wife’s family made a living in real estate, and now we are interested in adding real estate to our investment portfolio. But unlike a stock or an ETF, I can’t buy a rental property with a few thousand dollars. We need to save a larger deposit to complete our real estate projects.

We have a good start on the down payment for a second property, but we’re not there yet. In the meantime, our funds are deposited into a high yield money market account at Capital One Bank, which earns us a little something in the meantime.

Create a loan sinking fund

Last month my wife and I bought a new car to make room for our growing family. After much debate, we decided on a new Toyota Sienna Minivan. Thanks to our more than 800 credit scores, Toyota offered us a 0% APR loan. It’s too good to refuse!

I would never prepay a 0% loan. It’s free money that you can use to earn interest elsewhere, although you can afford to pay it back immediately. Companies in a similar scenario use a “debt sinking fund” where they save money, by earning interest, which they later use to pay off debt. If you wish, you can use a dedicated bank account for this purpose.

Use your high interest account the way you want!

There is no right or wrong way to use a high yield savings account, but there is something wrong with keeping your money at home under the mattress. The best high interest online accounts have no minimum balance, no recurring fees, and offer you much better rates than you would get at a local bank branch.

Your money is too important to be left in the wrong account or ignored. With a quality savings account in your financial arsenal, you know your money is growing, safe and available when you need it. If your bank account isn’t doing the same, maybe it’s time for a change.

Following savings and retirement blanket