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Fortunately, there are now savings accounts with all of the features of a regular account including FDIC insurance and ease of deposits, but with an interest rate that 4.5% to 6%. They are known as high-yield savings accounts. A typical savings account earns about 0.5% annual percentage yield (APY). That means at the end of one year, you would earn $45.50 more on $1,000 in a high-yield account vs. a typical  savings account (assuming 0.5% APY on the regular account ant 4.5% on the highyield account.). Compound interests means that money you make in a highyield savings account will also continue to grow faster than in a typical bank savings account.

Find a bank that you like, sign up, and transfer some money into the new high-yield savings account from your checking account. Set up an automatic withdrawal plan from the checking account into the high-yield savings account. Just a little bit each week will steadily grow the account over time.

Investment accounts are reasonably liquid, as you can pull out any money needed at any time, but because the funds are not guaranteed, they are a little riskier. For example, the Vanguard 500 has returned an average of 12% a year since the middle 1970s, but the return is not guaranteed year-afteryear. Some years have shown a loss, while others have had incredible gains. The potential returns are too good to pass up when it comes to investing. Typically, your money doubles every 6 years in a Vanguard 500, while in a 5% savings account, your money doubles every 16 years. It is not always wise to invest everything in investment accounts. There have been many years that returns were positively scary with 20% losses. The positive gains occur over a long term. You need to put money in and not spend too much time tracking it or worrying about what you hear or see in the news.

If you have $500 or more in extra cash, you can purchase a certificate of deposit (CD). CDs are a way of investing a fixed amount of money for a fixed term (typically from 3 to 60 months) usually at a fixed interest rate. They are a great way to put away some extra cash and collect it at the end of the term. At that point you can purchase another CD or deposit the money into another account.

>>Read more from the Saving The Smart Way series