Why Trying To Earn High Interest Rates On Savings Makes Sense

With interests rates paid by traditional bank savings accounts stuck below a paltry 1% for years and no sign that they will rise anytime soon, many savers are left to wonder how to earn high interest rates on savings, so they can earn a decent rate of return on their savings.  While there are many ways to earn high interest rates on savings, some of them are quite risky and are not suitable for investors that want to keep their money in relatively safe financial products.  However, there are some financial products that both pay high interest rates on savings and are relatively safe to invest long-term savings in.

Before delving into ideas regarding earning high interest rates on savings, it is important to point out why pulling money out of extremely low interest bearing bank savings accounts and putting it into alternative high interest paying financial products makes financial sense.  Although a saver may feel comfortable with their savings earning less than 1% in a bank savings account, because they fear they will lose their savings by putting the money elsewhere, in reality, if a savings account is paying less in annual interest than the annual inflation rate, the saver is actually losing money on the buying power of their savings.

High Interest Rates On Savings Investment Options

The following are some ideas regarding how to earn high interest rates on savings (keep in mind that some of these financial products are not insured and interest rates are subject to change over time; a registered financial professional should be consulted prior to moving savings out of a bank savings account and into an alternative interest paying financial product).

• Junk Bond Funds – Junk bond funds spread the risk of holding high yield junk bonds and pay impressive annual rates of return.  The Barclays Capital High Yield Bond Fund (JNK) pays 6.70% annually.
• Municipal Bonds Funds – Buying individual municipal bonds can be risky and difficult; however, there are municipal bond funds that can be purchased which hold numerous municipal bonds to reduce the risk associated with an individual bond default and pay impressive annualized dividends.  The Dreyfus Strategic Municipal Bond Fund Inc. (DSM) pays 6.30% annually.  The Eaton Vance Municipal Bond Fund II (NYSE MKT: EIV) pays 5.66% annually.
• Real Estate Funds – With the housing recovery in the United States gaining steam, funds that invest in dividend paying companies associated with the real estate market are an enticing way to play the real estate recovery and earn an impressive annual rate of return.  The iShares FTSE NAREIT Mortgage Plus Capped Index Fund (REM) pays an impressive annual interest rate of 11.31%.
• High Dividend Stock Funds – Buying individual high dividend paying stocks is a risky proposition; however, high dividend stock funds that invest in multiple high dividend paying stocks mitigate the risk (although these funds still leave an investment exposed to overall stock market risk).  The PowerShares KBW High Dividend Yield Financial Portfolio (KBWD) pays 8.20% on an annualized basis.

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