What $100,000 in Savings Earns You Right Now
Many traditional savings accounts offer minimal returns, with some providing as little as 0.01% annual percentage yield (APY). At that rate, $100,000 would earn just $10 per year in interest, leaving significant potential earnings on the table.
For better returns, consider these alternatives:
– High-yield savings accounts (HYSA): Offering around 4% APY, these FDIC-insured accounts provide instant access to funds while earning approximately $4,000 annually on $100,000.
– Certificates of deposit (CDs): Also providing around 4% APY, CDs lock in rates for terms typically ranging from three months to five years, protecting against future rate cuts.
– Treasury bills (T-bills): With APRs near 4%, T-bills are exempt from state and local taxation (though federal taxes apply) and have terms from four weeks to 52 weeks.
– Money market accounts (MMA): Similar to HYSAs but with checkwriting capabilities, some MMAs offer yields above 4% APY.
The optimal choice depends on your financial timeline and goals. If you may need funds within six months, a high-yield savings account likely works best. For funds you won’t touch for a year, consider a 1-year CD to lock in rates, or evaluate T-bills based on your tax situation. If checkwriting is important, a money market account may be preferable over a high-yield savings account.