If you’ve spent any length of time hanging around this blog lately, then you’re clearly interested in learning about new ways to save more money. As well you should – according to Kiplinger, even the banks that offer the highest deposit account rates are barely hitting 1%. If you want to go for accounts on the ‘net instead, the highest returns you’ll find these days max out around 3% – and good luck qualifying to open one if you find it.
The Feds are keeping interest rates as close to nada as they can reasonably muster while the economy sorts itself out this year. If you’re thinking CDs may be the way to go instead, think again. Rates currently top out around 1.19%, and that’s for allowing an institution to hold your money hostage for up to five years.
Although savings accounts do have their place, there must be a better way. Luckily for you – there is. Shrewd investors are beginning to use their savings accounts for reasons aside from their pitiful interest earnings, opting instead to sink their savings into unique new investment vehicles to maximize returns.
Savings Accounts – Use Them Differently
Most people already know that it’s vital to build up an emergency fund for your family. In this shaky economic climate, you never know when you or someone you love will have trouble finding employment, end up laid off, downsized, injured… or worse. That’s why it’s imperative to set aside at least six months of your total living expenses to pad yourself from a financial meltdown.
Obviously, many people are using their savings accounts for this very reason. When used in this way, the potential interest isn’t as important as is the immediate accessibility of the funds. Here’s the new way you can put those savings dollars to work: once you’ve fully funded your savings, keep adding regular chunks of cash to the pot. Then, every month or so, transfer the excess into a peer-to-peer (P2P) lending account and begin investing your money in a portfolio of nontraditional personal loans.
Social Lending – It Beats Savings Accounts with a Stick
Platforms such as Lending Club and Prosper are online lending platforms that allow investors like you and me to directly fund personal loans for individual borrowers. The interest rates you’ll earn as an investor vary wildly based upon the creditworthiness of the applicant. Most investors spread their investment over a large number of loans in order to insulate themselves from risk if a borrower defaults.
Sound scary? It’s actually not at all. The practice has been surprising well-received by the financial community over the past few years – Lending Club in particular has even earned endorsements from such bigwigs as The New York Times and Forbes. Investors have overwhelmingly positive accounts – and most earn between 5.66% an 10.56% net annualized returns! Makes CDs look a bit outdated, wouldn’t you say? Stop parking your money and begin growing it by signing up as an investor on Lending Club today.