The 7 Best Ways to Earn Interest & Make Your Money Work for You

Cody Cromwell
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Open a High-interest Savings Account

A high-interest savings account is a guaranteed way to guarantee yourself some extra income. While your money may not amount to the big bucks, you could earn a bit more than a penny if you put it in the right account. If you are comfortable with compounding interest and saving, you will earn money you never thought possible. The great part is you don’t even have to go near a bank to get it.

When you take the time to save money, it is only a matter of time before it starts earning you interest. Even just a few moments a day can go a long way towards a bigger investment. Saving money can be a part of your regular routine, something you – might even be doing without realizing it. If you want to take the next step toward building wealth, now is the time to make a commitment to improving your financial situation.

If you’re not already doing so, you should consider opening a high-interest savings account. This is the best way to get consumer rates. If you want a higher rate, look for an account that either pays interest on your principal, or one that pays interest on balance plus a one-time bonus. The one-time bonus is only available in interest-bearing savings accounts and is the most common promotion on high-interest savings accounts.

Switch to a High-yield Checking Account

One of the easiest ways to earn more cash in the kitty and make your money work for you is to switch to a high-yield checking account. I have written a detailed post with a comparison of several high-yield checking accounts for beginners. Simply, a high-yield checking account is a checking account that pays a higher interest than the ones offered by most other banks and does not require you to maintain a minimum balance. There are some banks that offer high-yield checking accounts with minimum balance requirements intentionally, so that you end up keeping only minimum balances in their checking accounts. But if you use a high-yield checking account to earn the interest it pays, you are free to manage your finances the way you want to.

It is a good idea to use as many high-yield checking accounts for your banking needs as possible. But here are a few more ways to earn more interest on your money:

  • Earn interest on your money by investing in high-yield savings accounts
  • Direct-buy stocks and ETFs
  • Take advantage of ATM banking offers
  • Certificate of Deposit with the best interest rate
  • Take advantage of dedicated money market account offers
  • Borrow from friends and family

Look for High Introductory APY Rates

You’re getting ready to invest a certain amount of money in a savings account or a CD. You want to find something that has the highest interest rate available … but you also want something that’s safe and secure. Maybe the best option is a high-yield certificate of deposit (CD)?

However, there are some things you should know before jumping at the offer with the highest available rate.

Generally, introductory APY rates decrease over time. The longer you have the CD, the less of an advantage the higher interest rate is going to be. So you should look very carefully at the financial institution’s terms of the CD before committing yourself to it. Are the interest rates guaranteed in writing? Are there penalties in case you redeem your CD before its maturity date? And are the interest rates set to drop further after CD maturity? Be sure to ask all of these questions when making your selection.

Some online banks, however, will refund your interest on the unused portion of your account if you exercise your early withdrawal option. If you think that you may make use of the option to withdraw funds early, or for any other reason, look for a financial institution with terms that guarantee this convenience.

Consider Opening a CD

CD accounts allow you to make a deposit and earn interest on a specific amount of money for a specified amount of time. The depositor is only responsible for the fees for the funds (the remainder is subtracted from the deposit), and anything earned from the accrued interest is placed back into the account.

You can use a CD account to save up for something specific (such as a vacation), or simply as a method to save your money for the future. This theoretically encourages you to have your money work for you, instead of working for your money. However, to be successful with a CD account, you need to be disciplined and set to save a specific amount of money on a regular basis.

Interest rates are at an all time low in the current economic climate, but the continuing issue of hard earned savings that are sitting in bank accounts that are basically losing money is worrisome. Purchasing an interest-bearing CD could help reduce the issue that is finally starting to affect household finances – the problem of 'not enough money'.

CD accounts pay interest that can range from 1% to 4% interest, or possibly more. Typically the higher the rate of return, the longer the duration of the CD you'll need to meet the minimum deposit amount. The other major consideration is whether or not your savings account has no or low-interest rates. This is an important consideration if your goal is to make your savings automatically grow to a certain amount.

Utilize a CD Ladder

When you start out as a new investor, your best bet is to find an investment that provides both long-term and short-term benefits in a conservative manner. Traditional safe investments such as CDs with maturities of six months to two years are a good place to start.

Traditional CDs offer less flexibility than money market accounts, but the interest rates have been much higher historically. Over the long run, CD savers have done far better than money market savers. In addition to higher rates of return, the original depositors are guaranteed the principal, while money market account holders have no such guarantee.

Because of the higher rates, CDs are also considered more secure, a desirable feature when you are dealing with your most valuable asset: time.

Open a CD Ladder

As you become more experienced in investing, you want to include more and more investments to your CD ladder. Generally, investors will want to open a CD ladder with a different investment for each month of the year.

Two or three years down the road, you now have a nice CD ladder with different investment options throughout the year. Of course, when this happens, you also want to make sure that you choose the right investments for your CD ladder.

You can check out an analysis of the best CD rates available right here.

Consider a Money Market Account

Check With Your Local Credit Union

Your local credit union or bank can almost always match or beat the interest rate you’re currently earning on your savings account. Why? Because those institutions earn a higher interest on money they’re lending out.

How to Know Which Accounts Are Right for You

Every month you open a new savings account, you may be reaping what you sow. But one thing you’ll never reap is money. Look at it this way: Each month, you’re planting a tree for the future. And though the nature of trees is to grow larger over time, so do your savings accounts.

Unlike most other investments, your savings account is set to work for you. As the money accumulates, you’ll earn interest. This is money you’re earning with no effort on your part. It’s a passive income, and the amount of interest you earn (as a percentage, of course) will depend on how much money you keep in your savings account.

Every month, you can review your progress and determine what’s working well and what’s not working at all. By doing so, you can find a financial ally that’s capable of guaranteeing your success as you make your way to financial independence.

If you need guidance in the form of steps to take, here are seven ways you can earn some interest and build your savings account.

Bottom Line

Finding the best interest rate for any given loan is a combination of risk and personal preference…when vetting for risk and selecting the interest rate to go with, your risk tolerance may be quite subjective. The two factors with the most impact may be your personal debt-to-income ratio or your credit score.

Beware of Hidden Fees

A lot of people wonder how banks and credit unions make money. One of the complaints a lot of people have is their tax dollars go to subsidize the interest rates of some of these loans. So, the question they often have is How can I avoid some of these fees? and How can I make some of my money work for me?

Here are some of the best ways to earn interest and make your money work for you.

Step 1: Money Market Accounts

Money Markets are accounts that are typically offered by bank and credit union. They are similar to savings accounts, but your money will generally earn a higher interest rate.

A lot of the newer accounts are actually subsidized by government interest rates. If your savings are earning a little bit of interest, you can deposit them into a money market account to start earning a higher return earlier.

This is especially important if you plan on making any larger investments because the earlier you get them in, the lower your cost. Making sure you are getting the highest interest rate is important when saving for any major milestones or for retirement.