CDs and Bonds: Two Ways to Increase or Boost Your Savings

Many people have savings accounts, and that is a good idea. However, savings accounts yield a relatively low yearly percentage. And many people with savings bonds and CDs are surprised to discover that they are not making as much as they could be with the money they have set aside for savings. There are two simple things that can be done to boost your savings: renew your savings bonds and get online CDs.

Renewing your savings bonds can be a great way to boost your savings. Many of the bonds from years past have matured and are no longer earning interest. This means that your savings bonds may be just sitting there, doing nothing. Analysts figure that Americans are losing $300 million a year in interest because there is $9 billion worth of savings bonds that have stopped paying interest.

You can visit www.publicdebt.treas.gov to determine whether your savings bonds are among those that have stopped paying interest. If yours aren't paying interest anymore, redeem them, pay the necessary taxes, and then invest in the latest government savings bonds. Right now these are Series EE bonds. They pay a much higher interest rate than regular savings accounts (at right around four percent or so). The Series I bonds are also good choices, as they feature a guaranteed rate of return (Series EE can fluctuate), as well as providing for inflation adjustment. It is fairly easy to invest in any of these bonds: visit savingsbond.gov or visit your bank. It is also possible to purchase government savings bonds using a payroll deduction.

Most people know that Certificates of Deposit (CDs) yield a better annual percentage rate than savings accounts. And, interesting enough, getting these CDs through online banks often yield even higher rates. This is because online banks do not have the same sort of overhead as more traditional banks. And the reputable online banks are FDIC insured, just like traditional banks. This means that in the event of a failure, the bank is sold to another bank, which honors what has been done. If no bank will buy the failed institution, the FDIC issues checks for the funds, up to $100,000.

Many online banks offer CDs ranging from six months to five years. For the six-month, online CDs yield about half a percentage point higher than the CDs offered by more traditional counterparts. The same is true for other yields, with some online banks offering nearly five percent on their give year CDs.

If you are interested in making your savings work for you, you might consider investing in savings bonds (or redeeming and reinvesting your old bonds) or in switching to CDs with online banks. CD laddering is a good way to maximize your risk-free savings, and doing so with online CDs can help you earn even more.