I had a friend once who was so suspicious of the banking system that he wouldn’t even take out a checking account let alone set up any kind of savings. He literally kept all of his cash in a jar at his house. I would criticize him at the time about needing to put his money in the bank but the more I think about it, it wouldn’t really matter. Banks are not going to give you much of a return on your money. You might as well keep it in a jar in your bedroom or a hollowed out stump in your backyard.
Yet, that begs the question, “What do I do with my money if I don’t put it in a bank?”
You know that is a great question. Personally, I tie my money up in the stock market and peer-to-peer lending. The results have been much better than your traditional bank. Between these two options, I am currently getting a return of somewhere between 4 and 6 percent. Granted, this is not the absolute best out there but it is still much better than the .06% that banks pay out on average.
Now, you might not be comfortable with the stock market. Many people are not. Personally, I feel like that most of this is a fear driven emotion based upon the thought that the money will be lost. While people do lose their money in stock from time to time, that is mostly due to overly-aggressive investing and selling low during hard times. The statistics support stock investing over a long period of time.
However, for those who are not quite ready for stock investing but are also tired of the traditional savings route and the lack of a solid return, what are your options? I grabbed the following list off of goodfinancialcents.com, so all credit goes to them. You will see Lending Club (which I have written about before) at the top of the list. This is a reliable peer-to-peer lending company that I use. Everything is linked up as well so you have a lot of reading options here.
The best short term investments to protect your money and limit your risk:
- Lending Club
- Cash Back Rewards Offers
- Roth IRA
- Certificate of Deposits (CD)
- Money Market Accounts
- Short-Term Bond Funds and ETFs
- 5-Year Treasury Inflation Protected Securities
- Municipal Bonds and Corporate Bonds
- Pay Off High Interest Debt
- Bonus Idea: Prosper
Bottom line: It’s really your responsibility to get on top of your finances but the options can often be overwhelming. Gaining a better understanding in regards to what is available can aid you tremendously in making those investing decisions. Be informed so that you can make the best choice for you.
Life is Strange. Live it Well.