When families in Texas and across the nation set aside money for short‑term goals, they often wonder how to earn more than the meager rates offered by traditional savings accounts without exposing their principal to market volatility. Douglas Boneparth, a certified financial expert and co‑founder of Bone Fide Wealth, answered that question in CNN’s recent Savings Challenge.
Match Your Time Horizon to the Right Strategy
Boneparth stresses that the longer you can leave money untouched, the more you can safely pursue higher yields. He advises matching the length of time you won’t need the funds with an appropriate vehicle—whether a high‑yield savings account, a short‑term CD, or a carefully selected bond fund.
Build an Emergency Fund First
Before tackling higher‑return options, Boneparth recommends establishing an emergency fund equal to at least three months of living expenses. He suggests placing this safety net in a high‑yield savings account, which typically offers rates above the national average while keeping the money FDIC‑insured.
Consider Debt‑Management Plans for Overwhelming Debt
If debt feels unmanageable, Boneparth points readers to the National Foundation for Credit Counseling (NFCC). The NFCC can negotiate lower payments and interest rates through a Debt Management Plan (DMP). Under a DMP, borrowers make a single monthly payment to the NFCC, which then distributes funds to creditors. Importantly, a portion of that payment can be automatically routed into an online savings account, helping borrowers build an emergency fund while they pay down debt.
Bruce McClary, senior vice president at the NFCC, explains that clients who complete a DMP often finish debt‑free with a dedicated emergency fund, reducing the risk of falling back into credit‑card debt. He notes that DMPs typically involve a start‑up fee of about $35 and a similar monthly maintenance fee.
High‑Yield Savings Accounts and Short‑Term CDs
High‑yield online savings accounts currently offer rates ranging from 4% to 5%, well above the 0.5%‑1% rates most brick‑and‑mortar banks provide. For those who can lock away money for six months to a year, short‑term certificates of deposit (CDs) can lock in comparable yields with the added security of a fixed rate.
Use Treasury Securities for Extra Safety
U.S. Treasury securities, such as Treasury bills (T‑bills), remain a low‑risk option for investors seeking modest returns. While yields fluctuate with market conditions, they are backed by the full faith and credit of the United States, offering a safe haven for conservative savers.
Stay Away from High‑Risk Stock Market Gambles
Boneparth cautions against chasing the stock market’s “volatility rollercoaster” when the goal is capital preservation. While equities can deliver higher returns over the long term, they also expose savers to significant short‑term swings that can erode principal.
Take Action Today
Readers with specific questions can email Boneparth at [email protected] or sign up for the weekly newsletter for ongoing tips. By combining a solid emergency fund, disciplined debt management, and carefully chosen low‑risk investment vehicles, families can achieve higher returns without jeopardizing their financial security.
Original reporting: KEYT (Ventura/Santa Barbara) — read the source article.
