Where Is the Safest Place to Save Money?

1. Savings Account

A savings account is typically a deposit account held at a financial institution, such as a bank or credit union, that accrues interest and is protected by federal insurance. You can usually open a traditional savings account with a low initial deposit and withdraw your money at any time (sometimes up to a certain number of withdrawals per month).

Savings accounts keep your savings separate from your everyday spending cash, making them a solid option for your emergency fund or short-term savings goals like a wedding, vacation or home renovation.

There are two main types of savings accounts:

• Traditional savings accounts: These standard savings accounts are offered by brick-and-mortar banks or credit unions. They typically pay lower interest rates, sometimes as low as 0.01%.
• High-yield savings accounts (HYSAs): HYSAs offer significantly higher interest rates than traditional savings accounts, so your money can grow faster. These accounts are often available at online banks, which can afford to offer higher rates because they have lower overhead costs than traditional brick-and-mortar banks. However, high-yield savings accounts may have more restrictions, such as higher minimum balance requirements or transaction limits.

Your savings account is likely your best option to keep your money safe for the following reasons:

• Liquidity: Unlike other savings options, such as CDs and government bonds, you can usually withdraw your money from a savings account anytime. Some savings accounts may restrict the number of monthly withdrawals.
• Interest rates: Many online banks and financial institutions currently offer interest rates for high-yield savings accounts at or above 4%. While these numbers pale when compared with some higher-risk investment options, they offer growth with minimal risk.
• Low or no fees: You should be able to find a financial institution offering low or even no monthly fees that would otherwise cut into your interest gains.

2. CD Account

A traditional CD account is another low-risk financial product banks and credit unions offer that pays you a fixed interest rate for a specific term, such as six months, five years or even longer. In exchange for committing to keep your money in your account, the bank typically pays a higher interest rate than a standard savings account. When your term ends, or "matures," you'll receive your initial deposit plus the earned interest. However, if you withdraw funds before the account's maturity date, you'll typically incur penalties.

Aside from a traditional certificate of deposit account, there are several types of CDs you can choose from, such as the following:

• Bump-up CD: If you're concerned about missing out on higher earnings if interest rates rise during your CD term, consider a bump-up CD. As its name implies, this type of CD allows you to "bump up" your rate if a higher one is available during your term. Generally, you can only increase the interest rate once per term.
• Liquid CD: Also known as no-penalty CDs, these CDs allow you to make early withdrawals from your account without paying a penalty. No-penalty CD rates vary, but you may find rates around 4% or higher with a term of one year or longer.
• Jumbo CD: A jumbo CD may help you earn higher interest rates while protecting your principal amount if you have a substantial sum you wish to keep safe. This type of CD requires a higher minimum deposit, usually $100,000 or more. Like all CD types, the account comes with deposit insurance that covers savings up to $250,000 per institution and per account holder. That means any savings above that amount won't be fully insured.

3. U.S. Government-Backed Bonds, Bills and Notes

The United States government offers three classes of fixed-income securities to investors: Treasury bonds (T-bonds), Treasury bills (T-bills) and Treasury notes (T-notes). These investments are attractive to investors looking for safety because the U.S. government backs them.

Here's how these securities work in a nutshell: When you buy a Treasury bond, bill or note, you're essentially loaning the government money. In exchange, you'll earn interest on your deposit, usually at a higher rate than a savings account, but it could vary based on the term of the security. You can purchase these investments in increments of $100. And while you could pay federal, state and local taxes on interest earned in savings accounts and CDs, you're only responsible for paying federal taxes on interest earned from your Treasury bonds, bills and notes.

Let's look closer at these government-backed securities:

• Treasury bonds: T-bonds are the longest-term government debt security, with maturity periods of 20 or 30 years, although you can sell a bond before it matures. These bonds pay interest every six months at a fixed rate. As such, T-bonds provide a solid mix of liquidity and stability, with rates that exceed those from a standard savings account.
• Treasury bills: T-bills are short-term investments ranging from as few as four weeks up to one year. You'll earn more by investing in longer-term T-bills. Treasury bills differ from bonds and notes because they don't come with a fixed interest rate. Instead, you buy T-bills at a discount rate and take earnings when you receive the face value of the bill once it matures.
• Treasury notes: If you're looking for the advantages of a government-backed security but don't want the 20- or 30-year obligation of a Treasury bond, you may prefer the flexibility of U.S. Treasury notes. These notes offer short- and intermediate-term maturities of two, three, five, seven and 10 years. Like T-bonds, Treasury notes pay interest on a semiannual basis.

You can purchase Treasury bonds, bills and notes through the TreasuryDirect portal, or alternatively, you can buy or sell these securities through your bank or brokerage.

How to Keep Your Money Safe

Keeping your money safe begins with choosing the safest vehicles to park your money, but don't forget to protect your accounts from scams, identity theft and other forms of fraud.

Follow these best practices to help safeguard your money:

• Don't share account info with others. While sharing a password with a friend or family member may seem harmless, it can unintentionally compromise your account. For example, if the person you share your password with isn't knowledgeable about phishing scams, they could unknowingly provide your credentials to someone who could then access your account.
• Create strong passwords for your accounts. Using the same password for all your accounts puts them all at risk if an intruder discovers your password. If you want to avoid the hassle of remembering multiple passwords, consider using a password manager. These tools create and store strong, unique passwords for each of your accounts, and you only need to remember one master password for your password manager.
• Use multifactor authentication with all of your banking and investment accounts. Multifactor authentication (MFA) is a security measure that helps protect your account by requiring two or more types of identification to access it. For example, you use multifactor authentication to access your account when you must enter your password and then confirm your identity by entering a code sent to your phone.
• Be wary of public Wi-Fi. You should exercise caution when using public Wi-Fi, as its security is often weak and exposes your data to potential intruders. Consider using a virtual private network (VPN), which encrypts your connection to improve your online security.
• Update your computer and devices regularly. Don't ignore those pesky software update notifications you receive because they often include patches to fix known security issues. Remember, hackers often exploit security holes in outdated systems.

The Bottom Line

Choosing a safe place to save money can help you protect your savings so it will be there when you need it. As part of your efforts to strengthen your financial well-being, don't forget about your credit. Regularly review your credit report and credit score with Experian to see where you stand. Free credit monitoring can also alert you to potential identity fraud sooner.