How to get the most out of your extra cash 

If you’ve saved your way to a place where you find yourself with some extra cash on hand above and beyond your savings targets, you might be wondering what to do next. There are many ways to put your extra cash to work, including a range of financial products and account types that can earn you extra interest or return, while remaining easily accessible should you ever need it. 

Don’t be afraid to shop around, explore products within your existing bank, or even look at what other banks have to offer. Americans have missed out on $603 billion over the past eight years, simply by sticking with their current bank.1 While you might feel loyalty to a particular bank or brand, remember that you are paying them to hold your money, and you need to choose the best option for you and your money.   

Not sure that moving money to new accounts or an entirely new bank makes sense? Take a look at the numbers. An account offering a mere 0.05% APY compared to a bank offering 3% APY can make a massive difference on how much interest you accrue on a savings balance, for example. 

Say you have $2,000 in your regular savings account, currently earning 0.5% per year in interest. If you don’t make any additional deposits, after five years, you will have earned $50.50, bringing your balance up to $2,050.50. Now, say you found another bank offering 3% APY. In that same period, you would earn $318.55, bringing your account up to $2,318.55. That’s $268.05 more in your pocket that barely had to lift a finger for. 

By not moving accounts or reevaluating your options, you might as well be stashing your cash in a shoe box in your closet. 

In this article, we’re going to take a look at some of the best ways to put that extra money to work for you in as simple a way as possible. There are a variety of different savings and insurance products available that can take your money further for you.

Ways to save and earn 

Savings accounts are some of the most common and easily accessible ways to get more from the money you have sitting in the bank. In fact, with the recent increases to interest rates, savings products are becoming more attractive than they have been in the past. 

These accounts usually pay you a higher interest rate than your standard checking account.  

As you shop around, pay attention to the rates being offered. Sometimes institutions offer short-term teaser rates that are higher than the rate you’ll get going forward as a guaranteed rate. There can also be hidden fees or limits on the number of transactions you can make in a set period of time depending on a bank’s particular rules, which should be taken into account. 

High-Yield Savings Account 

Typically available through online banks, but also available at many institutions, these accounts offer higher yields because the cost of capital is much lower than their branch competitors. You still benefit from high liquidity, or easy access to your money, but you might not be able to drive down to your local branch and talk to a bank teller.  

Certificates of Deposit (CDs) 

The yield on CDs could be higher still, but they also come with slightly less liquidity. CDs have specified terms, ranging from 1 month to more than 5 years, and in most cases, withdrawing your money before your CD matures may result in penalties. These are better suited for funds you don’t anticipate needing access to for that period.  

Money Market Accounts 

These accounts are unique in that they pay variable interest based on the rates dictated by the market. To open a money market account, you'll likely be required to deposit and maintain a higher minimum balance than a HYSA. Accounts with better rates typically have much higher balance requirements and fees as well. Money Market Accounts may offer easier access to your money than a HYSA, though they may be subject to transaction limits. 

Other Options to Keep in Mind 

Savings vehicles are good for holding extra cash that you may want to access in the near future. However, they aren’t your only choice. If you have a need for life insurance, some types of life insurance provide a way to accumulate a cash value as well.  

You can access your cash value. However, you need to make sure you carefully read your policy and understand how this affects you and any tax implications. If you work with a financial professional, they should be able to offer you guidance on which methods makes the most sense for you to make the most of your extra cash. 

Cash-Value Life Insurance 

Cash-value life insurance can be a great place for extra cash, but it is not a savings vehicle. It is important to understand that you are purchasing life insurance and therefore must have an insurance need, and there is a cost for that insurance need. Before you buy a policy make sure you fully understand what you are getting, how it works, and any risks or fees that may be associated with it. Life insurance applications are subject to underwriting.  

Whole Life Insurance 

Whole life policies are the simplest form of life insurance that offer a built-in cash value component. These policies are designed to last a lifetime, rather than a fixed term, allowing your cash value to grow over time. Whole Life policies can be attractive because of the guarantees built within the policy when premiums are paid. They have guaranteed cash value growth over time, with a potential for more if the policy is eligible for dividends (which are not guaranteed). . The strength and stability of the company you choose can be a factor since the guarantees associated with any life insurance is based upon the claims paying ability of the issuing company.    

Variable Universal Life* 

With a variable universal life policy, your premium is invested into a sub account that you choose from among the options made available in the policy. Although your balance may grow substantially, you also bear some investment risk and the possibility of losing value. 

Putting Your Money to Work for You 

Having extra cash on hand is a luxury that you can make the most of by making sure that it’s in an account that has the best opportunity for a return on your balance. Most banks have relatively accessible interest-earning savings, CD or money market products. Shop around, compare rates and fees, and talk to a financial professional about what could work best for you. 

1Americans Lost $603 Billion by Sticking with Big Banks. Here’s How,” Wall Street Journal Video, 09/01/2023

*Variable universal life insurance are sold through NYLIFE Securities LLC (Member FINRA/SIPC), a Licensed Insurance Agency and a New York Life Company. 

This article is provided for general informational purposes only. Neither New York Life Insurance Company, nor its agents, provides tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions. 

SMRU #545777.1 exp. 02/17/25 

Disclosure

William O Donnell is an agent licensed to sell insurance through New York Life Insurance Company and may be licensed with various other independent unaffiliated insurance companies in the states of CT, FL, MA, ME, NH, NV, NY, RI, SC, TX, and VA. No insurance business may be conducted outside the states referenced.

William O Donnell is a Registered Representative of and offers securities products & services through NYLIFE Securities LLC, Member FINRA/SIPC, a licensed insurance agency, and a wholly-owned subsidiary of New York Life Insurance Company, 640 George Washington Hwy Bldg 103, T 4, Lincoln, RI, 02865, 401-276-7401. In this regard, this communication is strictly intended for individuals residing in the states of CA, CT, IL, KS, MA, ME, MO, NH, NV, RI, TX, VA, and WA. No offers may be made or accepted from any resident outside the specific states referenced.

William O Donnell is also a Financial Adviser with Eagle Strategies LLC, a Registered Investment Adviser, and a wholly-owned subsidiary of New York Life Insurance Company, offering advisory services in the states of CA, CT, IL, KS, MA, ME, MO, NH, NV, RI, TX, VA, and WA. As such, these services are strictly intended for individuals residing in the states referenced.

The Million Dollar Round Table (MDRT), The Premier Association of Financial Professionals®, is recognized globally as the standard of excellence for life insurance sales performance in the insurance and financial services industry.

Neither New York Life Insurance Company nor its agents or affiliates provide tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.