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Columns | Go Far With Kovar

Is There a Better Way to Earn Returns on Cash?

by Taylor Kovar

Hi Taylor - I'm looking to buy a house within the next two years and want to make sure I'm growing my money as fast as I can. I've currently got my funds in a savings account with a 1.4% APY, but is there another type of account that will get me better returns? I'm putting around $1,000 a month into the account. - Bradley

Hi Bradley - Glad you're building up your cash reserve instead of taking on a big mortgage. Unfortunately, the only way to speed up your yield is by taking on more risk. 1.4% is probably as good as you'll find, and any other investments will subject you to too much volatility.

The problem with money markets is they have us believing there might be a magical way to turn a huge profit in a short amount of time. While that's possible, it's never probable, and it's far more common to lose money in a year than make a bunch in the same amount of time.

With a truncated timeframe like the one you're working on, there's not much to do beyond what you're already doing. Keep putting money in savings, make sure it's liquid and ready to move, and then find ways to increase the amount you put away each month. If there are corners you can cut or ways to earn a little extra, that's the best way to reach your goal more quickly.

Until you have a significant amount in your savings account, you shouldn't even be thinking about the yield. Yes, you want an account that provides a good return, but you should be focusing your efforts on the actual earning and saving. The harder you work to put money into your account, the more the amount will grow and the more your yield will come into play. Ideally, you'll start putting in $1,500 and then $2,000 each month. Then, before you know it, that 1.4% will start looking a lot better.

Remember that the best returns come from somewhat risky investments, and those investments often hurt your bottom line before they help. This makes long-term stock investing work well, but short-term saving doesn't fit the same mold. It's important to adopt this mindset as you continue earning, saving and investing.

I wish I had a more exciting answer, but it seems like you're aiming for a practical approach and I'd hate to mislead you. Stay the course, look for ways to spend less and save more, and you'll have the money you need sooner than later. Good luck, Bradley!

Taylor Kovar September 21, 2018
More "Go Far With Kovar"

Disclosure: Information presented is for educational purposes only and is not an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. To submit a question to be answered in this column, please send it via email to Question@TaylorKovar.com, or via regular mail to Lessons on Wealth, 106 E Lufkin Ave., Lufkin, TX 75901.

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