7 Best Places to Put Your Savings Safely

With all the doom-and-gloom talk surrounding the coronavirus-induced economic downturn, there has been one positive development during the pandemic: more Americans are saving money.According to the Bureau of Economic Analysis (BEA), the U.S. personal savings rate surged to as high as 33.7 percent. In the years leading up to the COVID-19 public health crisis, the figure averaged around five per cent.

But how is this even possible? There are a number of factors driving this trend: nothing to do outside the home, an injection of government stimulus checks, many people turning to the bullish stock market, cold weather. There are only a few of the many reasons why U.S. households are saving more than ever before.

So, as more Americans have an incredible amount of savings at their disposal, what should they do with it? The obvious answer is to not blow it all at the shopping mall. But there are other things you can do with these enormous savings that go beyond buying a new television or purchasing a new coat.

Here are seven of the best places to put your savings safely, while giving it the chance to grow even further: 

1. Index Funds

On a long enough trajectory, the U.S. stock market tends to goup. A glance at the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite Index over the last 30 years proves that investing in stocks is perhaps the best money decision you can make. But how should you invest your savings?

Since it can be challenging to pick individual stocks, and you probably lack the time and resources to stay glued to the tickers, one of the best strategies you can employ for your savings, at least a portion of them, is using index funds.

Index funds, usually in the form of an exchange-traded funds (ETFs) and mutual funds, mirror the composition and performance of broader indices, like the Dow Jones or the S&P 500. Fees are low, performance is great, and it is great for people who want to set-it-and-forget-it.

If you want to get the benefits of investing in an index while still having the access of an everyday account, consider an all-in-one checking and investment account. 

2. Money Market Accounts

In an environment of historically low interest rates, it can be disappointing to see your money generate disappointing returns. While it will not garner you enough money to comfortably retire, money market accounts are better than conventional savings accounts since they pay more interest and offer customers basic banking transactions.

Some customers may choose to utilize a certificate of deposit for their savings, but money market alternatives are better for those who do not wish to have their money tied up for a period. 

3. Corporate Bonds

After the Federal Reserve – and other central banks – announced corporate bonds would be added to asset-buying efforts, the corporate bond market has soared. Having an institution with unlimited money at its disposal can do wonders for any investment.

It can be difficult for mom-and-pop investors to buy debt from the likes of Apple, Tesla, or JPMorgan Chase. Therefore, it might be wise to take advantage of an ETF that invests in corporate bonds.

Unsure what to buy? Here are a few options that have performed quite well over the last 12 months and offer competitive yields:

• The iShares Convertible Bond (ICVT): 1.14%
• The FlexShares Credit-Scored U.S. Long Corporate Bond Index Fund (LKOR): 2.83%
• The SPDR Portfolio Long Term Corporate Bond ETF (SPLB): 2.86%
• The VanEck Vectors Investment Grade Floating Rate ETF (FLTR): 0.54% 

4. Treasurys

If you turned on CNBC or Bloomberg as of late, you may have learned about the boom in Treasurys. The benchmark 10-year Treasury yield has surged approximately 70 percent year-to-date to 1.645 percent. The investment had climbed to a 52-week high of 1.778 percent.

Of course, if you do not want to hold an investment for that long, the T-bill market is a good alternative since these bonds are for less than a year. They are cheap to buy and easy to sell. While they do not offer substantial interest rates, it is still a great way to pile onto your accrued savings from the last year.

Here is a list of the yields offered in the T-bill market:

• One-month: 0.013%
• Three-month: 0.015%
• Six-month: 0.03%
• One-year: 0.056% 

5. Dividend Stocks

One of the reasons why central banks slashed interest rates is to nudge people into the stock market to purchase assets. Because the returns on your deposits are so low, it can be hard to keep up with inflation. You have no other alternative but to dip your toe in the stock market, even if you are averse to risk.

How do you play it safe with your savings and earn a good return? The answer is simple: dividend stocks.

A dividend is a portion of profits earned by companies paid out to shareholders. A strong dividend showcases, for the most part, the strength of a company. From its bottom line to its corporate health, dividends are a great indicator that your capital is in good hands.

Unsure what to buy? Here are some of the most reliable dividend stocks of the last 20 years (yield and years of growth):

• Chevron (CVX): 4.64% | 33
• Coca-Cola (KO): 3.34% | 58
• World Wrestling Entertainment (WWE): 0.86% | 22
• Lowe’s Companies (LOW): 1.40% | 57
• Target (TGT): 1.51% | 52 

6. A New Account

Is there anything wrong with having more than one account for your money? Not at all. In fact, this is encouraged, especially if you possess a net worth north of $250,000. The Federal Deposit Insurance Corporation (FDIC) guarantees your deposits of $250,000 or less should a bank fail. Therefore, it is a wise idea to have a couple of accounts if you are a wealthy individual or household.

Put simply, a smart move you can make is to open a new account, whether it is a high-yield savings account, or money market (see above). 

7. Bullion

Even if you are not a gold bug, it is always a prudent step to include bullion (precious metals) in your overall portfolio. Now, there are two ways you can invest in bullion: paper and physical.

The former consists of buying ETFs that are supported by gold holdings such as iShares Gold Trust (IAU) and Aberdeen Standard Gold ETF Trust (SGOL). The latter includes owning physical gold and silver bars and coins. At a time when inflation is on everyone’s mind, owning gold and silver could be a smart decision to protect your assets.

In the end, does this mean you should transfer all your money from your savings account into these finance instruments? Not all. It is still great to have funds in your savings account, whether it is for an emergency or for your retirement. But, as your savings grow, you may want to explore other was to grow your money, allocating some of these savings towards any of the strategies above. Just as we recommend diversifying your investments, diversifying your savings is a great idea too. As long as you’re getting your money to work harder for you, you’re moving in the right direction!