5 Safe Places to Put Your Money During the Covid-19 Crisis
- Author: Jeffrey Simmons
- Posted: 2024-08-09
If you have moved some money out of your investments, you may have some extra funds that you need to hold on to right now. You are probably wondering where you should keep this money at this time. You are likely thinking about factors such as earning money on it and having it available to you when you need it. Here are some safe places to keep money right now until the COVID-19 crisis blows over or your finances return to normal.
Money Market Account
This is an account at your bank that is similar to a savings account but has some more benefits for you. The money market account will pay a slightly higher rate than a savings account, although interest rates are extraordinarily low in general right now. Your funds in this account are also available to you at all times. The drawbacks of a money market account are that you are limited to a certain number of withdrawals per month and you must keep a higher minimum amount in the account or face a fee each month. Nonetheless, these accounts are insured up to $250,000 and are a place to park money while you are deciding what to do with it or when you will need it.
Bond ETF
Depending on the bonds, this is a stable and secure place to keep money while earning a return on your investment. A bond ETF will earn you a higher yield than a savings or a money market account. Plus, it will be a liquid holding that you can easily access whenever it is that you need the money. Investing in an ETF that holds government bonds will give you some protection while paying you a little bit. However, you may need to pay a transaction fee when buying or selling this security. You may also have some market risk because interest rates are so low right now. If they move up, your bond ETF will go down in value.
Certificate of Deposit
You can always put your money into a certificate of deposit. In exchange for keeping your money tied up for the term of the CD, you get a slightly higher interest rate. In addition, the CD is also insured so you can some safety and assurances. The drawback to this is that you will need to keep your money in the CD until the end of the term or face a withdrawal penalty. This can limit some of your options in the meantime. In addition, short-term rates are very low right now so you may not even get paid that much for keeping your money locked up for a period of time.
Paying Off Debt
While this is technically not parking your money anywhere, it is a way to safely hold onto what you have. By devoting some of your liquid assets to getting rid of debts, you are giving yourself a more secure financial future. Even though you are giving the money over to someone else, it is reducing what you owe and the interest that you have to pay on it.
Given the very low interest rates right now, you may even be better off paying down debt than trying to earn a low rate of return on your money. Sometimes, it is smarter to avoid paying a 15-20% interest rate than trying to scramble to get 1%. Plus, this will help you get in a position where you can borrow more money in the future if you need it.
Checking Account
Even though your checking account does not pay you much interest, there is a benefit to staying liquid during these challenging times. You never know when you may have an unplanned expense that can require you to dip into your reserves. Your checking account is the most liquid asset that you have, and there are no limits to how you can access your money. That may be exactly what you need if you lose a job or have your income cut. Sometimes, it is better just to simply have access to your money when you need it.
When the economy is teetering on the edge of collapse, liquidity is often kins. However, when you use your money to pay back debt, you can also save yourself quite a bit and help with your monthly budget when times are tough.
