Take Control of Your High Yield Investments

It is easy to lose track of high yield investments during a recession. In many cases, investors refuse to look at their holdings so they don’t see how much money they are losing in the stock market or how little interest their savings account is earning. Avoiding investment accounts may provide a short term solution to ease any stress during a recession, but it can actually harm your finances in the long run.

Take certificate of deposit and high yield savings account rates during this most recent economic downturn. Many of these high yield investment options are offering rates well below 1%, which provides little motivation to investors to stick with them. Even though interest rates are low, investors still need to stick with their long range financial goals.

I had a wake up call recently on some high yield investments of my own. The very low rates on a couple of my CD’s left me with little motivation to add new capital to these accounts. I didn’t even have any desire to search for the best available interest rates from other banks. I thought there was no point in wasting my time on accounts that paid so little.

For several months I left these accounts alone, earning under 0.5% on my investment. I left these accounts earning very little (losing valuable time and interest each day), until I realized I was actually negatively impacting my long term goals of financial freedom. After spending some time researching various high interest investment options, I realized I could save $500 this year by making one simple change.

Earn an Extra $500 per Year

My wife and I have been able to build a nice emergency fund (~$50,000) that will cover at least 12 months of our current expenses. These funds are usually invested in either short term CD’s (less than 24 months) or high yield savings accounts.

Back when the economy was booming, we earned between 4.5% – 5.5% on our emergency fund savings by keeping this money in CD’s. The high rates allowed us to grow our investment by reinvesting all of the interest that we earned. Now that the economy is struggling and interest rates are low, we have to work even harder to build our savings.

Here is a snippet of our previous high yield investment that was earning under 0.50% and where we are moving our funds.

Previous High Yield Account

• High Yield Account – 3 month Certificate of Deposit (CD)
• Interest Rate – 0.35%
• Deposit – $50,000
• Annual Earnings – $175.31

New High Yield Account

• High Yield Account – Credit Union Savings Account
• Interest Rate – 1.50%
• Deposit – $50,000
• Annual Earnings – $755.64

As a result of moving our funds around, we will make an additional $580.33 off of our emergency savings. Ignoring our investments would have cost us over $500 in extra passive income. For about two hours of total work (1 to research and 1 to open the new account), we were able to make significant improvements to our savings.

Final Thoughts

Getting fired up about earning less than 2% on our savings may not seem like a great accomplishment to many people. Low interest rates may be good for people looking to buy a house or a car, but are bad for passive income investors. In times like these, it is important not to get discouraged by few high yield investment options.

Making the most of a poor investment environment is still very important to becoming financially independent. Investors who can maximize their investments in both good and bad economic climates are better positioned to become financially independent. Those who simply give up in a bad economy are destined for failure.

Related posts:

1. 5 Reasons to Open a High Yield Savings Account
2. 5 Tips for Investing in a High Yield CD
3. High Yield ETFs – An Alternative to Dividend Paying Stocks?
4. What does Dividend Yield Mean and How do I Calculate it?
5. How to Select Dividend Paying Stocks by Looking at the Current Yield

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