With record high interest rates, this is an excellent time to start investing your money to see a positive return. If you have never invested before, you may feel it is too risky for you. However, some of the lower risk options allow you to put your money to work while keeping it relatively liquid if you need it soon. Having a shorter time frame means you do not have as many options, but that doesn’t mean you can’t see any return.
Creating a Five-Year Plan
Anyone can get started with investing, no matter how much or how little they have. However, the more you have, the more interest you will earn. Take some time to look at your monthly budget to see which areas you can save the most in. There are plenty of ways you can reduce your monthly expenses, and you can start as soon as today. Shopping around for financial products like insurance or student loan refinancing allows you to find a provider with better rates, allowing you to put more in your investment portfolio. The Navient Marketplace lets you compare providers in one place.
Online Savings Accounts
An online savings account is an excellent way of saving money if you will need it within a few months. Savings accounts do not pay as much as other investment options, and you would need quite a bit of money in a savings account to see a large return on your investment. Still, online savings accounts can pay a little better than ones at regular banks. You might see several times the average rate with an online bank.
Corporate Bonds
Many people see bonds as being an advanced investment than other types. Bonds will pay you regular amounts of interest, and you will receive your starting amount back when the bond is mature. You can find corporate bonds with lots of different maturity dates, so you could find some with a short enough timeframe to give you your money back when you need it.
Of course, if the company goes under during that time, they may not be able to afford to pay you your principal or interest. Take some time to review the ratings of bonds you are considering investing in. Standard & Poor’s has a rating system for different bonds so you can choose the safest ones out there. It’s common to purchase bonds in denominations of $1,000, so make sure you have enough set aside before going this route.
Treasury Bills
If you are looking for a safe option, Treasury bills are one of the best. The United States government backs with full faith and credit, meaning you will receive your full principal back. They often have maturity dates of a year or less, making them a great way to manage your money. You can often find them at a discount, and their value will grow until they are mature, at $1,000. Because of their low risk, they will not pay much in interest, but it is often better than a checking account.
