Because money is a necessity, making it grow guarantees your family’s survival. If your money is growing, you can look forward to the future with greater comfort and hope. As a mother, you want to provide for your family. If possible, you want to ensure they have everything they need. These are the safest ways to grow your money so your family can prosper. They are safe in that the market exerts far less influence over the interest offered at any given time. They are also vehicles that are not particularly volatile. Most come with a guaranteed interest rate.
Safe Ways to Grow Your Money
- Money Market
- Certificate of Deposit
- Bond Funds including U.S. Treasury Bonds
- Balanced Mutual Funds with a stable history
Basic Savings Account
If you haven’t started saving on a regular basis, you should. Curb your spending to include necessities primarily and carve out about 10-20% of your take-home income to devote to saving for an emergency fund, short-term goals, long-term goals, and retirement. A traditional savings account will only yield about .01%. To achieve 1% or higher, you’ll need to open a money market account.
Bond Funds
If you want the best monthly dividend payers, you’ll want to look at bond funds. Please note that the yield and price of the bond are inversely related to the market, so that when rates rise, prices of the bond will fall. Here are five different types of bonds:
- Treasury bonds: The interest is exempt from state taxes
- Government Sponsored Enterprise (GSE) bonds: Mortgage issuers like Freddie Mac and Fannie Mae are GSEs. The government guarantees liquidity by backing the loan or bond
- Investment-grade bonds: These are corporate bonds or corporate debt backed by companies with a triple A to a triple B credit rating
- Mortgage-backed bonds: These bonds lose value when mortgages are prepaid
- Municipal bonds: The interest from these bonds is exempt from federal taxes
Money Markets
The concept of a money market is the term given to trading short-term loans between banks and other financial institutions. Money markets require you to have an initial investment ranging from $0 to $50,000 to open an account. Today’s rates range from 1.00% to 1.80% annual percentage rate.
- May be a minimum deposit ranging from $0 to $25,000 to $50,000
- Limits may apply to withdrawals and transfers each statement cycle
- Deposits are FDIC insured
- Some financial institutions allow digital banking
- Direct deposit may be available
- Many have no maintenance fees
- Check writing may or may not be allowed
Certificate of Deposit
Certificates of deposit (CDs) usually have a maturity date. The term could range from one month, three months, six months, nine months, one year, to five years and more. The interest rates can yield .25% to 1.60% earned at maturity, which is the term of the CD. Generally speaking, CDs pay more than money markets, but you do have to tie up your money for a specified period of time.
Balanced Mutual Funds
The balanced mutual fund will have bond funds, money markets and lower risk stocks all in one vehicle. Owning shares in such a fund would subject your investment to a much lower risk of loss. To invest in a mutual fund, there may be a minimum balance to open and maintain the fund (can be as much as $500 or higher). If your balance falls below the minimum, the company may close your account and send you a check for the remaining balance.
The Federal Deposit Insurance Corporation (FDIC)
Investing in any one of these vehicles: basic savings account, money market, bond fund certificate of deposit or Balanced Mutual Fund will yield higher results than simply stashing your money in a box.
Most of these vehicles are very safe and offer FDIC insurance on investments up to $250,000 per institution. So, if you have a joint account of $500,000 in a CD, you are subject to losing nothing because each joint owner is insured for $250,000 with FDIC insurance.
Select a category of savings to start the process of building financial security. Diversify your account types as you accumulate assets. When you can afford more risk, you can enter the low-risk mutual fund market, choosing options like a balanced mutual fund.
