Ever since I was young, I've been a 'saver' so I have a decent amount of money in my savings account. My dad and I were discussing it, and it doesn't make sense for me to have that much money in an account where it's only earning .1% interest. I've thought about maybe investing some of it, or purchasing bonds, or putting it in a CD (certificate of deposit).

I don't know what the smartest thing to do is. Should I put it all in one place or split it up? Any pros or cons to any of the aforementioned options?

Like I said, all my money has just sat in the same place since it was put there, so I'm really clueless as to what to do with it where it will be of most use and earn me the most interest.

Any input at all is more than appreciated.

I would put some of it in a CD and leave some in the regular savings. If you want you could invest or buy bonds; I would definitely put maybe half in a CD.

Edit - I say leave some in the regular savings because that will be the easiest to access in case of an emergency.

Transfer it into my bank account.

Check to see if your bank or another bank/credit union in your city offers a high interest savings account.

It depends on how much risk you are willing to take and if you want a long or short term investment. Do you already have an IRA or 401k set up? If not, do that first. After that keep 6 months of living expenses in a high yield savings account. Typically you can find one of these at a new bank or on the internet if you are going to make a large initial deposit and keep the balance high. If you still have money left after that you can start investing it. If it were me I would invest in a money market account. Keeping the explanation short, it means your money will be invested in various savings bonds, government t-bills, certificates of deposit and other safe financial instruments. If you choose a money market bank account then generally you will receive a checkbook with which you can draw funds. If you choose a money market mutual fund you will have to open an account at an investment company and there will be different restrictions. These are shorter term investments that are still higher yielding than a general savings account and they can be directly compared to obtaining a certificate of deposit or savings bond. It is a personal decision, I would never want a CD or bond for myself, but would rather do something like my parents did and purchase those for my children when they are born. It really depends on what you need and if you want to consider having access to that money. If you have enough money to do so, you can of course split it among these investments. If you are looking for something more long term than a money market account I can expand on a few other types of investments, but for right now I think it is your best option.

I just wanted to repeat what hooray4jj said - first you need to assess what the money is for. Are you saving for something in particular? Emergency savings? Retirement?

I second the notion that you should have emergency savings - at least enough to cover 6 months worth of expenses - in a CD (I guess that's similar to a GIC [guaranteed investment certificate] here in Canada), or in another type of longer-term savings vehicle where you can access it easily with little to no fees.

After you have that squared away, take a look at your retirement. Common investing advice says that you should be putting at least 10% of your income away for retirement. This also helps you at tax time, since you don't pay tax on that until you retire.

Then you should look at what you are saving for - a house? Wedding? Baby? Travel? School? Try and figure out when you think you will need to access the money. If it's within the next year or two, you might want to consider putting it in a high-interest savings account. I use ING Direct, but there are several companies out there willing to offer you MUCH more than 0.1% interest!

If you know you won't need the money for another 2-5 (or more) years, then you could put the money in CD, bonds or investments. At this point, you have to evaluate risk, as hooray4jj mentioned.

The more risk you are willing to put up with, the higher potential payout (but also the higher potential loss). So bonds and CDs pay less interest - but it's guaranteed. Mutual funds and other market-linked investments CAN provide higher interest, but it depends on how the market does, and so you can actually lose money, depending on how well the market does.

If you have a significant amount of money and you want a professional to make the most of it for you, you can always seek advice from a personal financial planner, as well. They can manage your investments and try to match your goals. However, they often operate either through a percentage or a flat fee.

Something I forgot to add and pharmdancer reminded me of it, is that a money market account obtained from a bank is FDIC insured. For some that is a selling point, for others (like me) it isn't a contributing factor. After evaluating your situation you may find out that you don't have as much to invest as you thought and a bank account and retirement fund will be sufficient.

A diversified portfolio is best. More risk (higher return) in some areas, conservative in others. Don't know if you are in the US or not, but if you are, the municiple bond market seems to be very strong and performing well right now. If your parents work for a company that has an employee stock purchase program, that might be a good way to invest, if it is a good company with attractive stocks.

If you really have a good amount of cash sitting in a bank, and you want to do something with it besides for letting it sit there, then maybe your bank has personal financial advising service for their customers to use. You should check that out too. Hope that helps.

Emergency savings in the US should not be in a cd as those have significant penalties for early withdrawal. Put it in an internet bank with higher rate of return.

Put the rest of the money in a balanced index fund-look at Vanguard as they have a very low expense ratio.

If you're not going to touch it for at least 5-10 years, investing it in a balanced portfolio is a good idea. I used to have an investment portfolio from when I had a payout from a major car accident and we eventually used it as a deposit for our first house.

If you're going to want to access it it sooner, a high interest savings account is the best plan. We have our son's earnings from commercials just sitting in a high interest account and it earns around $25/month in interest. We could invest it, but since it's his money, not ours, we wanted to avoid all risk. He'll get access to it when he's 18. We also have a high interest savings account, but it gets emptied periodically. At the moment, it looks pretty good, but it's just about to get emptied to pay for my EP costs. It's actually a pretty good system for us, because the money is fairly easy to access (takes a few days to get access to it) but is locked away enough that we don't touch it for regular spending.

Helen

A full suite of financial advice would take into account what you're saving for - if you know you will have some fixed expenses in a certain currency. If you're just trying to build wealth for a rainy day, then managing money compentently is like any other compentency.

So you ask the question: "what alternatives are there to a 0.1% interest account?", and let's say you pick an answer. In order to do something successfully, you need to know both how to do it, and why you are doing it. Therefore, the smartest thing you can do depends on how smart you are. Hot tips ("just tell me what to do") aren't going to help you in the long run.

Something you should understand, though: Inflation is an increase in the money supply (i.e. how many dollars exist). The consumer price index is a weighted measure of the cost of common retail consumables.

If both go up (and they do), your savings buy you less. If both go up at a rate faster than 0.1% (and they do again), you lose wealth. What you could have bought with the money a year ago, you couldn't afford today. In order to truly build wealth, you must outstrip both of these influences.

Thanks for your advice everyone. I don't have a really large sum of money, so I can't do a whole lot with it. I just feel it's a pretty decent sum for people my age.

I don't have any specific plans for what I'm saving for. Potentially a deposit on a home or a new car, but that won't be for probably close to 5 or more years. I just really want to earn as much from it sitting there as I can.

I think I've decided to put a chunk of it in a CD where it can accumulate interest because I don't need access to it for a while. I may invest a small amount because my parents have some stock that's doing rather well and has earned them some money. With the rest, I'm going to find a bank that has a better interest rate because I've realized mine is really low, and it's not earning me anything. So I'll put that in a higher interest savings account.

Thanks again for everyone's input!

^check internet banks first to see what kind of rate you can get. From your most recent post I am worried that you may think you have more money than you do. I used to be like you, started saving money right out of college, had a good chunk saved up. Then I moved and started a new job, things didn't go so well and between moving expenses and problems with my job in my new town I blew through my savings in about 5-6 months. Don't put your money on lockdown in a CD with a long maturity rate if you don't have at least 6 months of living expenses in your high interest savings account. You can make a lot of money with riskier investments, but if you don't start out with a large capital stock you won't be earning as much as your parents have anyway. In your case I feel like we are talking about a few thousand dollars, which is great, but probably not worthwhile to do anything with it other than plop it in your high interest savings account. If it were me, I would put it all in that account, and then work on setting up an IRA or 401k for all of your savings going forward. Hopefully you know about these retirement funds, but if not these funds spread your money across different types of stocks and you can be conservative or aggressive with your money (an more importantly, diversified). Also note that although not recommended, you can typically withdraw from your IRA without a penalty if the money is being used for the purchase of your first home.

I like to go by the adage that a dollar today is worth more than a dollar tomorrow. Meaning that unless you are investing your money at a higher interest rate than the current inflation rate, there is no point in actually investing. That is why I have a problem with long term CDs or bonds. Often times the money would be worth more to you now than sitting untouchable at a rate that is not earning you enough.