As physicians, the concept of little or no risk is extremely appealing to us. When discussing treatments with our patients, we always weigh the risk/benefit ratio, so that delicate balance is hard-wired into our brains. And really, who doesn’t want something that’s zero risk and all benefits?
Believe it or not, this concept can actually apply to your monthly cash flow.
Here are a few things you can do immediately to see larger gains in your savings and cash flow–with essentially no risk. Most may seem obvious, but sometimes we’re so busy, we miss the obvious things (it happens to the best of us). So let’s get right to it.
1. Use an Online Savings Account
Simply moving your money from a savings account with a low-interest rate and into a high-yield online bank can result in quite a bit of extra cash. Online banks are FDIC-insured just like the traditional brick-and-mortar institutions, so you can rest assured that your money is safe.
If all of your savings is sitting in a brick-and-mortar like Wells Fargo, Chase, or Bank of America, you’re almost literally leaving cash on the table—cash that could go toward a vacation or hopefully, after reading this blog, an investment that produces significant passive income.
So which online bank should you go with? Any of the following savings accounts are a great option:
Still not sure if an online account is for you? Here are some pros and cons to help with your decision.
TIP: It can take a few days for the account to be linked to your checking account, so the sooner you start, the sooner you’ll save more.
2. Use a Money Market Account
A money market account is similar to a classic savings account, except it often pays a higher interest rate. It’s also FDIC insured, so carries the exact same protection as your savings account.
In spite of the cons, this might work great for most of you, because you’re likely already saving up for a new home, or are about to begin student loan repayment, and you don’t want your money to be tied up in a risky investment.
Why does the bank pay out more interest for a money market account versus a traditional savings account?
Because there are fewer restrictions on what they can do with your money. With a money market account, the banks are not only able to loan out your money deposited with them but are also able to invest in bonds, treasury, notes, etc.
If you’ve decided a money market account is for you, you’re probably wondering how to get started. Well, almost all banks, both brick-and-mortar and online, have them. You can also find them at brokerage accounts. Many of you already have relationships with a brokerage to fund your Roth IRA or 401K. Check to see if any of them offer a money market account and what the interest rate is.
Here's an example of current rates of savings vs money market accounts at Bank of America.
CAUTION: A money market account is different from a money market fund. Money market funds are great options for some people, but they are not FDIC-insured.
3. Certificate of Deposits
A Certificate of Deposit (CD) is like a savings account, except that you agree to keep the money in the account for a certain term. In return, the bank typically offers you a higher rate of interest.
CDs are also FDIC insured–up to $250,000 per depositor.
Here are some examples of current rates of CDs by term and yield
Synchrony Bank 1.25%
Ally Bank 1.05%
Synchrony Bank 1.25%
Ally Bank 1.25%
All of these methods can increase your monthly cash flow, both in the long term and the short. But the best part is that, as opposed to some other methods, they provide absolutely no risk. As physicians, we know that no risk is a very good thing.