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Once you’ve gotten out of debt and built up a little bit of savings, then there is a whole new challenge: Earning some actual interest on your saved money. Interest rates have been low for many years. With high inflation, it is a challenge to keep your buying power. It is even harder to grow your savings with the magic of compound interest. However, many people want to keep their money in accessible savings. What should you do to earn higher interest?
Boost Your Interest: Quick and Easy
For a quick and easy start, make sure you’re using a savings account with at least some interest, and check for a better product within the banks you already use. For example, Navy Federal Credit Union (NFCU) is only paying .25% on regular savings. Move that money to a Money Market Savings Account and increase your interest rate to .40% to .45%. It isn’t a huge increase, but it could be an extra $5 or $50 each month. Just for moving that money to another account within the same bank. (Rates as of 15 August 2022)
Just as a quick example, we have a bank account for college costs. Since bills are paid in August and December, money accumulates from December and August. With three kids in college, it ends up being a decent chunk of money. A couple of months ago, I realized that the Money Market account at one of my banks was paying approximately ten times as much interest as the savings account the money was currently sitting in. The first month I made the move, I earned an extra $40! on that money. Now, I’m not always sitting on that much cash, but I wish I had realized that sooner…we’ve had money in that almost-zero interest rate account for years.
Tying Up Money To Earn Higher Interest
If you don’t anticipate needing your money in the near future, Certificates of Deposit (CDs) are a great way to get higher interest rates. The downside is that in order to earn the higher interest, you’ve got to commit your funds for a certain period of time. In most cases, you can withdraw the money early but there will be a small penalty. The most common penalty I’ve found is that you’ll forfeit your interest for the term. I can live with that on the chance I’ll have an emergency.
Current (15 August 2022) CD rates from banks that I know military folks use:
- 1.16% APY on a 15 month CD from USAA
- 1.7% APY on a 12 month CD from Service Credit Union
- 3.0% APY on a two year CD from Pentagon Federal Credit Union
More Complicated Sometimes Equals More Money
If you’re ready to get fancy, step three is to search for special accounts or CDs that will offer you even more interest. There is only one certificate that I currently know about – please let me know if you find something else!
Navy Federal Credit Union is currently offering a special, one year, Easy Start share certificate that is paying 3.00% APY. It has some terms and conditions, such as a minimum deposit, maximum deposit, direct deposit, and month contribution, but you can tailor those to fit your needs. I opened a certificate with $2850, and scheduled a monthly recurring deposit of $10. This will keep my total balance under the $3,000 maximum while earning as much interest as possible. I’ll earn about $85 in a year, versus the $7 I’d earn in the regular share savings account. You can have one Navy Federal Credit Union special Easy Start share certificate for each member. (Special rules apply for kids, but basically you can put in $3,000 at the beginning and just let it sit – perfect!)
Deployment Opportunities
Don’t forget that if your service member is deployed to a combat zone for more than 30 days, he or she can earn 10% on up to $10,000 through the Savings Deposit Program. It is quite possibly the best deal out there – IF short-term savings is the right place for that money
Service Credit Union also offers 10% interest to service members deployed to a combat zone through their Warrior Savings Account. You have to move your direct deposit of military pay to Service Credit Union to qualify, but it might be worth it to you. That is an amazing interest rate!
Always keep your eyes and ears alert for special certificate rates, especially around the time of Military Saves Week in the spring. I’ve snagged CDs with rates as high as 5% during promotions.
A little effort can increase your savings earnings dramatically. A phone call or few minutes on the internet can easily boost your interest dramatically!
