Why Saving Accounts Aren't Working

Saving Account aren't worth the time and money because the interest rate is so low. When you can walk to a store and find a quarter and you just made more money that a savings account and that is a problem. Savings accounts do have their perks however the perks aren't worth it. There are alternatives that make more money.

Saving accounts are for saving money and are designed to make sure you can't take money out. The bank then takes the money that you put in and lends it out to other people or businesses. The bank charges interest on the money they lent out and you get a small share of the profit. The interest rates in savings account are low usually below 1%.

The alternative to savings account are bond ETFs. Bond ETFs are similar to stocks but don't have the same risk levels that are associated with stocks. These ETFs don't grow as fast stocks but grow more then savings accounts. The return of bonds can be 2-5% which can be a significant compared to saving account. One of the best bonds out there is US municipal bonds. These are considered very safe because they are backed by the US. Bond ETFs can also pay dividends. The bond ETFs that I am interested in are paying a monthly dividend. Over time these dividends can add up and more ETFs can be purchased.

One of the concerns of doing this is what if you lose your savings. Well if you bought US municipal bonds and they crashed, the least of your worries would be the money you lost. Also depending on what broker you use it will cost you very little to buy and sell these. I use robinhood which has free trading so all of my profits from the bonds will go to me and not going to the fees. I also use ETrade and some of the ETFs on that site are comminsion free.

In conclusion, I have closed my savings account for the most part and will be entering the bond market and hoping to make more money in that market than in a savings account.