Smart, Safe Way Your Cash Can Earn Money

Any kind of return on a secure investment is virtually impossible to find these days. This makes it tough for those that want to glean a respectable income on their cash, which includes rainy day money and the six-month financial cushion that financial experts recommend.

Brokerage houses and banks are paying next to nothing on the investments that are traditionally safe: checking accounts and money markets. In fact, MyBankTracker revealed on Jan. 16 how little banks in Indiana paid on cash: Chase 0.01% Annual Percentage Yield (APY), Bank of American 0.08% and Wells Fargo 0.05%. Another bank, Ally, paid more, 0.84%. This means that transferring cash to Ally’s money market would make more cash for the depositor.

There is even better news. If emergency money, meant not be touched except under extraordinary circumstances, is put into a five-year CD, a better return can be collected. Ally pays the most with 1.79%, while Chase, Bank of America and ING lag at 1.25%, 1.20% and 1% respectively (as of Jan. 16).

The downside is that if the money does have to be tapped there is a penalty of two months interest for Ally; I am not sure for the other banks. Ally has another option if the money is likely to be needed. The bank’s 11-month no-penalty CD pays 0.91%. The disadvantage is that it is so short and the money would have to be reinvested within a year if it wasn’t tapped. Compare this to a 0.30% return from the Bank of America for the same scenario.

Other states can be calculated by going to Ally’s website and typing in the appropriate state. The time needed to invest is 10 minutes according to Ally’s site. If this is true, it could be the best return an investor ever gleaned for the time spent. Someone who puts $50,000 away for five years at Ally’s rate of 1.79% would see a return of $4,631.89 at the end.

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NG gives the lowest return at 1.0%, which would be a return of $2,566.40. The difference between the two is $2,065.49. That means that the 10 minutes spent was worth $12,392.94 for the hour (6 times $2,065.49). There are few that would argue with this income.

For further reading:

Safe Money: A Smart Play for the Present

In Search of Higher Yields