A sum of $50,000 in cash can earn about $195 a year in an average bank savings account or as much as $2,300 if you put it into a high-quality corporate bond fund. Other options include money market accounts, money market funds, certificate of deposits and government and corporate bonds. The interest earning potential generally varies by the risk you’re willing to take on and how important it is to have quick, easy and reliable access to your funds. Get personal assistance deciding where to put your cash by talking to a financial advisor.
Considerations to Maximize the Interest You Can Earn
Before determining the best investment options to maximize how much you can earn off of $50,000 annually, let’s take a look at the most important considerations. These include what we mean by earning interest and the risk of your portfolio in order to maximize your results. Not everyone will have a risk appetite that can potentially maximize earnings. The things you should consider include:
- Interest Rates: Interest is money you can earn by lending your cash to another person or organization. Earning interest is the flip side of paying interest when you borrow money. Interest rates on loans vary widely, from the stinging 20% or so imposed by the average credit card issuer to the approximately 7% (as of April 2023) assessed on a typical 30-year home mortgage loan.
- Investment Amount: Interest rates earned by the money you loan also vary widely, from a fraction of 1% per year to nearly 10% a year. The difference depends on the type of account or security and the depositary institution or debt security issuer.
- Risk: Generally speaking, the safer your money is and the easier it is to get to it when you need it, the less it earns. If you want to maximize earnings with $50,000 then you may want to diversify by investing more than that so that you feel better about putting this amount into high-risk, high-reward accounts.
Now that you have a good idea of what factors to consider, it’s important to point out that each person will have an asset allocation that works best for them. The right interest-bearing investments will depend on not only these factors above but also what you’re trying to accomplish.
Interest-Bearing Investment Options
The specific places you put your $50,000 will have a large impact on how much it earns and how that aligns with your overall financial plan. We’ve taken a look at some of the most popular investments, and the list below are some of the most popular interest-bearing investments that you can make, or at least consider when trying to maximize your earning potential or to keep your money safe while earning interest. The following rates are approximations based on April 2023 data.
Savings accounts at banks and credit unions are both very safe and highly liquid. Bank savings account deposits are guaranteed against loss by the Federal Deposit Insurance Corporation (FDIC) while the National Credit Union Administration (NCUA) does the same for credit unions. And you can get your money any time the bank is open by walking up to a teller’s window. However, savings accounts also pay the lowest interest rates of any option, currently an average of 0.39%, enough to earn $195 on a $50,000 deposit in a year.
Money Market Account
You can get a higher interest rate on a deposit to a money market account without giving up any safety. You can also use a money market account to pay bills similar to a checking account. Banks and credit unions offer money market accounts currently paying about 2%, which would produce $1,000 in interest on $50,000 over a year. Find the best current rates using SmartAsset’s online money market account comparison tool.
Money Market Funds
You don’t deposit money in a money market fund as you do in a savings account. Instead, you buy shares in a fund that invests in short-term debt instruments, mostly issued by governments. Unlike deposit accounts, money market funds are not guaranteed with a government-backed insurance plan although they are still considered very safe. In 2023 money market funds were paying approximately 4.8% or so, meaning you could earn approximately $2,400 by investing $50,000 here for a year.
Certificates of Deposit
A certificate of deposit (CD) from a bank is a time deposit that requires you to commit your funds for a certain time period, usually between 28 days and 10 years. In return, you’ll get more interest than with a savings or other account you can access any time. One-year CDs are currently paying rates of 5.25%, which comes out to $2,375 in interest on a $50,000 CD.
You can buy debt securities issued by the U.S. government that pay interest every six months for up to 30 years and have zero risk of default. Buy Treasury securities directly from the U.S. government at TreasuryDirect.gov, where 52-week Treasury bills recently paid interest of approximately 4.75%. At that rate, $50,000 in T-bills would earn $2,375 in a year.
Series I Savings Bonds
These U.S. government securities pay an interest rate comprised of two rates, one of which is pegged to inflation. They currently are paying 6.89% annually, while also remaining very safe. However, you can generally only buy a maximum of $10,000 worth of Series I bonds per year. A $10,000 Series I investment would earn $3,445 in a year.
Debt obligations issued by the largest companies generally pay more interest than government securities but are riskier. To reduce risk, investors may purchase shares of corporate bond funds holding a diversified basket of bonds from many different issuers. Highly rated corporate bonds were paying approximately 4.6% interest, according to the Federal Reserve Bank of St. Louis, which means $50,000 would earn about $2,300 interest in a year.
How Much Can I Earn From Interest With $50,000?
An investor with $50,000 to invest for interest can earn from about $195 to about $2,300 in a year at current rates. The difference depends mostly on the level of risk and liquidity that is acceptable to the investor. Locking up money for longer periods, or taking on some risk of loss, increases the potential for higher interest earnings. The more at risk your money is, the higher the potential reward.
The best solution when trying to earn on your investments is to consider working with professionals who can help you determine how much you can earn without putting your money at risk. Typically a good balance in your portfolio can negate risk while providing you with the high-return potential you’re looking for.
The Bottom Line
You can earn up to a few thousand dollars annually by investing $50,000 into interest-bearing accounts, depending on what investments you choose. You might be able to earn more money if you invest in other things like a business or in rental properties. However, the account types above are your best interest-earning accounts that you can earn while protecting your investment. Speaking to a financial advisor can provide you with the best information on your personal situation.
Tips for Investing
- A financial advisor can help you generate the maximum interest that is compatible with your objectives and requirements. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- A certificate of deposit ladder that splits funds between a number of CDs with varying maturities is an easy and effective way to get a good rate of interest without taking much risk. As shorter-term CDs mature, the funds can be reinvested in new CDs, which reduces interest rate risk in an environment when rates are rising.
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