After taking several drastic measures I am finally crawling out of the financial hole I was put in from my divorce 4 years ago. My credit is recuperating and my finances have leveled out. To add to that I have just received an offer for a position that pays 50% more than I currently make!
I have never made a lot of money and live a modest lifestyle with minimal purchases and this salary would leave me literally with more money than I know what to do with. I want to explore the most efficient way to build a savings as I have never successfully done it before. I have set a goal to buy a house in three years and think I will be able to save about $2k a month if all goes as planned.
My question is, what method of savings should I use to yield the most from my money? I have looked into some high rate savings accounts with APY’s as high as 2.25% but I know very little about this sort of thing and want to learn. Any advice would be greatly appreciated.
If you need the money in 2-3 years, do the high Yield savings
follow the flow chart in the prime directive
I'm surprised only one other person mentioned it, but if your timeline is 3 years, you can look at opening CDs. Ally Bank just had an offer for a 14-month locked CD at 2.85% (but that's ended as of now). Something like that could be useful for you. Many 1-yr CDs are at 2.75%.
The main drawbacks I would warn about is:
– It does "lock" in your money behind a penalty and
– You can't continually add to a CD. Each time you'd want to add to it you'd need to open a new CD. Not a huge deal, but you'll have your money spread across many accounts at the same bank which can be a touch frustrating if you're like me.