Forget CDs and Savings Accounts. Here's How to Really Grow Your Money

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There's a reason savings accounts and CDs have been so popular over the past couple of years. Following a series of federal funds rate hikes on the part of the Federal Reserve, savings account and CD rates soared, allowing people with money in the bank to earn a fairly large, risk-free return.

But now that the Fed has begun lowering its benchmark rate, savings account and CD rates are expected to drop. And they're already lower than they were just a month or so ago, before the Fed's big September rate cut.

Now if you're looking to earn a nice return on your money on a short-term basis, savings accounts and CDs aren't a bad option. And if you lock in a CD now, before the Fed's next rate cut, you might end up with a return you're happy with. Click here for a curated list of some of the best CDs today .

But on a long-term basis, savings accounts and CDs are not great tools for growing wealth. So you may want to put your money somewhere else.

Don't settle for 4% returns

Savings accounts and CDs are still paying in the 4% range following the Fed's September rate cut. And you may be able to lock in a CD at 4% or more through the end of the year.

But these rates are expected to fall. And even if that somehow doesn't happen, you should know that over time, a 4% return on your money isn't super impressive.

Sure, it's a decent return. But why settle for 4% when you could possibly get 10% instead?

Over the past 50 years, the S&P 500's average annual return has been 10%, accounting for years when the market did great and years when it utterly tanked. If you have money you're looking to grow on a short-term basis, then investing can be risky, because you need time to ride out market downturns.

But if you have a roughly seven-year window or more to grow your money, then investing it makes sense. Click here for a list of the best stock brokers so you can open an account and start investing today.

The numbers don't lie

There's definite risk involved in owning stocks, more so than sticking to savings accounts and CDs. But the reward is just so much higher.

Let's run some numbers to highlight the difference between a 4% return on your money over time vs. a 10% return -- keeping in mind, of course, that even 4% isn't the norm with savings accounts and CDs in the long run.

Imagine you have $5,000 available today and have 30 years to grow it into a larger amount of money. At a 4% yearly return, you'll end up with about $16,000. At a 10% return, you'll end up with around $87,000.

That's a difference of $71,000. And to give that difference some context, as of 2022, the median retirement savings balance among Americans aged 65 to 74 was $200,000, per the Federal Reserve. With $87,000, you're almost halfway there. With $16,000, you're not even one-tenth of the way there.

To be clear, a savings account is the best place to put your emergency fund. And a CD is a good place for your money on a short-term basis.

In the long run, though, a stock portfolio could make you worlds richer. So it's worth getting started on building one as soon as you can. And if you're new to investing, check out this list of the best investment apps for beginners .

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