Six ways to maximize your savings
As you edge towards retirement, you’ll no doubt be thinking about how to look after your money — and to make your savings stretch that little bit further. A combination of quick wins and savvy financing can set you on the path to making the most of your savings.
As is often the case with your finances, putting the extra time in over the short term can pay off in the longer run.
Looking after your savings and maximizing your money where you can, is possible through a large variety of avenues.
If you’re willing to do your research, you’ll be able to determine which of these works best for you and your financial situation.
Plus, there are also some quick wins, like amending your budgeting, to give you an additional boost.
1. Start with your own budget
Before exploring the ways to boost your savings pot, the change in income that retirement brings means that savings should literally start at home.
Your earning capacity is limited when living on a fixed income, but if you’re able to alter your lifestyle and spending accordingly, you’ll put yourself in a much better position to manage the change.
Financial advisors can help you put together a budgeting plan. Or, alternatively, you can do it yourself by evaluating your monthly expenses.
Once you’ve established just how you plan to live on your fixed income — whether it be frugally or a little more luxuriously — you can look at what sort of unnecessary outgoings you might be able to cut out.
If cutting out things like streaming services, gym memberships or other annual subscriptions makes it easier for you to pay off debt, pay into a high-yield savings pot, or help you towards other savings goals, then you’ll have some choices to make.
2. Shop around
Although savings account rates can be relatively low, doing your research into the various offerings and comparing various offerings may still see you land an account with rates that are higher than the national average which, according to Bankrate, is 0.13 per cent.
Alongside standard savings accounts, you’ll also come across high-yield savings accounts that earn higher rates.
This is because they usually require a larger initial deposit, and access to these accounts is limited.
If you’re looking to open a high-yield savings account, you’ll be more likely to be accepted by a bank that you’re already with, since they will often offer it to valued customers.
But if you’re willing to squirrel money away and let it lie for an extended period, a high-yield account will be an effective way to boost your savings.
Shopping around for savings accounts has never been easier, and there are now high-yield bank accounts available to set up online.
However, you’ll need to do so with transfers from another bank that can be used to deposit or withdraw funds.
Above all though, if you want to maximize your savings, a high-yield savings account could be of ample benefit to you.
3. Use a CD ladder
For the uninitiated, CD stands for Certificates of Deposit.
These are available through many banks and credit unions and are FDIC-insured. Since they require large deposits that you cannot withdraw for a set amount of time, CDs often offer higher interest rates.
This time period can be anywhere from six months to five years, and if you do try and withdraw your cash before that time, you’ll be hit with a penalty.
A CD ladder will see you divide up the money that you’re looking to save and placing it into a number of CDs that have alternate term lengths — meaning there are a number of maturity dates.
When your term is up, and your money matures, you can reinvest it into longer-term CDs while your others continue to grow simultaneously.
In doing so, you’re taking advantage of CDs with the highest rates, while also having regular access to your cash.
4. Make the most of technology
When you’re tracking your spending, whether it be on expenses or additional outgoings, any extra help can be vital.
There is a huge selection of budgeting apps available that can systematically help to track your spending, while there are also banking apps that now include a breakdown of where your money is going — and how your spending aligns month-on-month.
Utilizing the tech tools that are readily available to you will help you to identify where your spending can be cut down or undertaken more efficiently.
5. Invest in bonds
You can give your savings an additional boost with low-risk debt investments such as bonds.
Bonds are issued by entities such as companies, states and governments to fund projects, and can offer investors the opportunity to lend them money that will build up interest.
Bond issuers will pay interest for the life of the bond and will return the face value of the bond at maturity.
Bonds are issued at a fixed interest rate, and for a specific period, so once again it is important for you to do your research before investing.
Each type of bond will come with a certain element of risk (if a company goes bankrupt, for example), as well as penalties for early withdrawals.
However, bonds are widely considered to be a low-risk investment that will build a steady yield.
6. Money Market Funds and Deposit Accounts
When you’re receiving a fixed income, it’s likely you’ll be looking to reduce the risk of your investments.
Another low-risk option is a money market mutual fund; though it only offers returns similar to those of short-term interest rates, it only invests in low-risk securities.
These are offered by many banks, as well as mutual funds and brokerage firms, but it’s important to note that interest rates aren’t guaranteed. So, to hammer the point home once more, make sure you do your research.
Money market deposit accounts, meanwhile, typically require a minimum initial deposit, and unlike money market funds, are FDIC-insured.
They may offer lower interest rates than options like CDs but offer the advantage of easy access to your cash.
Kate has written for leading publications and blue chip companies over the last 20 years.