These days, every penny we can save is valuable, and as savers, we’re always looking for the best way to save and earn interest on those savings. In this post, we’ll answer the question we savers ask ourselves most: Where can I save my money and earn interest?
Savings Accounts
When we decide to save, we immediately think of a savings account. There is a wide variety of these financial products offered by banks in the financial market. The idea is to save, but also to ensure those savings earn good interest. Let’s look at some of the banks that offer competitive savings accounts.
| Bank | Account | Share | Annual Interest Rate |
| Anchorage | Funding Account | $0.00 | 5% |
| HSBC | HSBC Flexible Savings | $0.00 | 4% |
Alternatives to savings accounts
Many savers are forced to look for alternatives to savings accounts due to high inflation and the low interest rates offered by these financial products. The best part is that there are various low-risk investment alternatives on the market that can help us earn good interest and maintain a good income so we can save and earn in the long term.
Let’s see what alternatives the Mexican financial market offers:
- Savings bonds or Savings Protection Bonds.
- Certificates of Deposit
- Monetary Regulation Bonds
- Mexican Treasury Bills
- Corporate bonds
- Dividend-paying stocks
- Preferred Shares
Savings Protection Bonds
Savings Protection Bonds are government securities, backed by the federal government. These Bonds are issued for 3-year and 5-year terms, with payments every 28 and 91 days, respectively. They are very safe financial products that offer maturities of around
5.23% at 3 years and 5.9% at 5 years.
Certificates of Deposit
Certificates of Deposit are securities belonging to the zero-coupon bond family. They are traded at a discount below their face value, do not accrue interest, and liquidate their value with returns on the maturity date. These instruments are characterized by the fact that the maturity date must fall on a business Thursday or another day in lieu of a non-business day.
They offer terms of 28 and 91 days, 6 months, and 1 year. They are very low-risk instruments with the guarantee that the government is responsible for repaying the investment and any returns generated. This allows us to save the investment and earn a certain amount of interest.
Monetary Regulation Bonds
These are bonds issued by the Central Bank to regulate liquidity in the money market and thereby facilitate the conduct of monetary policy. These instruments are issued and placed for any term, pay interest every 28 days, and the interest rate varies throughout the life of the instrument.
Treasury Bills
These are short-term public debt securities issued at a discount and with a fixed rate. They are issued by the Government as financing, and their maturities range from 3 to 18 months. When you purchase the bonds, you earn fixed interest during their term and on the bond until maturity.
Treasury Bills have a substantially lower risk level than their private counterparts. Therefore, their yields are also low. These instruments typically do not offer annual coupons due to their short maturities, ranging from 3, 6, 12, and 18 months.
Corporate Bonds
Corporate Bonds are securities issued by companies with the intention of obtaining medium- or long-term financing in exchange for interest payments, called coupons, on the invested capital. There are too many Corporate Bonds in force, which are issued for different terms, ranging from 3 to 10 years. They are typically issued in two coupon formats: semi-annual fixed coupons or monthly variable coupons.
An interesting aspect of these bonds in an investment portfolio, especially fixed-income bonds, is that they allow for increased returns. Corporate bonds pay an additional return known as the credit spread, which contributes to building and increasing our capital and saving.
Dividend Stocks
Dividend-bearing stocks are financial instruments characterized by distributing profits to their shareholders, known as dividends. That is, they are remuneration through the delivery of new shares of the same company or cash for buying and holding shares in that company. This instrument is widely used among investors as a long-term savings method.
We can access these types of stock market instruments through stockbrokers.
Preferred shares
Preferred shares confer an additional economic privilege on their holders. The holder of a preferred share has greater authority over the collection of dividends or the distribution of the remaining assets in the event of the company’s bankruptcy.
Preferred shares and common shares do not expire; however, preferred shares do not grant their holders voting rights, nor do they grant them any stake in the company’s capital. Their profitability is not guaranteed, as they are tied to profits. Therefore, they can be a good option for increasing our income and increasing our savings capacity.
Conclusion
If you’ve made it this far, you’ll already have a slightly broader view of the options available to you for saving and earning interest. As we’ve analyzed in this post, there are many alternatives to saving, and all of them, to a greater or lesser extent, offer returns that serve to increase our savings and continue expanding our savings or investment options.
We often lean toward savings accounts as our first option, as we associate investment with risk. However, savings accounts also carry a certain level of risk that can diminish our capital when affected by inflation, which is often higher than the returns obtained. Therefore, it’s important to know all the products with which you can save and earn interest that can outperform inflation.
