A June 1 deadline is looming for the United States. By that date, the country may run out of money to pay its bills. If an agreement to raise the debt ceiling is reached before, then business may be able to proceed as normal. Getting to that point, however, has been an arduous one as discussions between lawmakers have gone back and forth.
“[W]e still estimate that Treasury will likely no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1,” Treasury Secretary Janet Yellen recently wrote .
Amid this economic uncertainty – coupled with existing concerns over high interest rates and a potential recession for later in the year – many Americans may be looking closer at their investments. Where should they be keeping their money? And where should they consider moving it now?
Where to put your money in today’s economy
Here are two smart (and secure places) to put your money now.
A high-yield savings account
While higher interest rates aren’t great news for certain sectors of the economy they can provide a welcome boost for select deposit vehicles. High-yield savings accounts are one of those types. Rates on high-yield savings accounts have increased exponentially in recent months, making it a great way to boost your savings without having to worry about the volatility of the larger economy.
Interest rates on regular savings accounts are around 0.40%, according to the FDIC . But rates on high-yield savings accounts are many times higher, with a multitude of options available in the 4% to 5% range . How much does that equate to over a year? Using a $5,000 deposit as an example, savers using a regular savings account could only expect to see that grow to $5,020 after a full year. But those who make the same deposit into a high-yield account will have a bottom line of $5,200 over the same time period. And that’s just at the 4% rate. Chances are good that you can get an account with an even higher return, particularly if you elect to utilize an online bank .
Just note that interest rates on high-yield savings accounts are variable so the rate you get when opening it may not be the rate you keep over the long term. Still, your account, unlike other investments, won’t suffer from the turmoil in the larger economy, either. With the debt talks still tumultuous, it makes sense to preserve as much of your money as possible. High-yield savings accounts provide that opportunity.
A certificate of deposit (CD) account
CDs , like high-yield savings accounts, are also currently available at substantially higher interest rates than had been the case in recent years. Accordingly, they’re also a great way to protect and grow your money. Rates on these accounts are in the 4% to 5% range, many of which come with little or no penalties . Simply deposit your money for a select term and watch it grow from there.
CDs, however, are for specific terms only. After that term has expired you’ll need to renew it (likely at a different rate than what you opened it with) or withdraw your money and put it elsewhere. The rates on CDs are locked in, giving you an extra measure of protection in today’s climate. To get the full interest, though, you’ll need to keep your money locked away for the duration of the term. If you’re comfortable doing that then a CD makes sense for you now, particularly considering that you’ll be locked in no matter what happens in the rate environment over the short term. But, if you want to access your money frequently, a high-yield account may be the preferred alternative .
With a debt default potentially coming within days, it may make sense to shore up your finances now to prepare for the worst-case scenario. While you should always have a diversified portfolio complete with stocks, bonds and maybe even gold , it can’t hurt to protect your traditional savings by moving a portion of it into a high-yield account or a CD. These accounts will safeguard your money and grow it at a rate that you’re simply not getting by keeping it in regular accounts.
Which one do you think suits you the best of all?