6 Ways To Make Your Money Work For You

You may not love getting up five (or more) days a week and going to work, in order to generate much-needed cash for yourself.

But hold on -- you actually don't have to go it alone. While you work, you can also have some of your money working, too, generating more dollars for you. Here's a look at six ways to invest -- see which ones make the most sense for you.

1. Bank savings accounts

Let's start with bank savings accounts, which pay you interest. You deposit your dollars and they become more dollars over time. The problem is, though, that during periods of low interest rates -- such as the period we've been in for many years now -- they don't grow very quickly. Still, there are periods when interest rates are solid, if not steep, and at those times, your money can grow at a respectable clip in bank savings accounts.

The best savings accounts rates in the U.S., per the folks at, recently ranged from around 1.7% to 1.9%. (Those with high balances at certain banks may be able to get higher rates.) To put those numbers in perspective, in 1981, you could earn 14% interest in a savings account!

2. Certificates of deposit (CDs)

If you want to grow your money faster than a savings account, you can consider certificates of deposit (CDs) or money market accounts, which tend to offer somewhat better rates. The table below offers some CD interest rates for a few years in the past, to give you a sense of how rates can change over time. (Note that the rates would have fluctuated often during the year, and the numbers below just represent one point in time. Also, different financial institutions would have offered somewhat different rates at any given time, as they do today.)

Year Interest Rate for 1-Year CD
1984 11.27%
1988 7.57%
1992 4.32%
1994 3.08%
1995 5.65%
1999 4.26%
2000 5.63%
2002 2.16%
2003 1.05%
2006 3.81%
2011 0.48%
2016 0.27%

Data source:

Rates have risen recently, with reporting rates for one-year CDs of around 2.3% lately.

3. Bonds

Since bank accounts tend to be insured, the interest rates they offer, paltry though they may be at times, are close to sure things. If you're willing to take on a little more risk, though, you can do better. Consider, for example, bonds.

Long-term government bonds often offer steeper rates than bank accounts, and are backed by the U.S. government. Bonds sold by the U.S. government's Treasury Department are called Treasurys. State and local governments issue municipal bonds, while businesses issue corporate bonds. (Municipal bond interest is often free of federal taxes.) "Junk bonds" are those issued by not-so-solid companies. Junk bonds feature generous interest rates because they have to in order to draw investors willing to bear their risk.

Here are some recent Treasury rates:

Treasury Yield
3 month 1.94%
6 month 2.10%
1 year 2.30%
2 year 2.54%
5 year 2.72%
10 year 2.82%
30 year 2.93%

Data source:

Note that investors don't necessarily buy a bond when it's first issued and then hold it to maturity, which can be several years or decades. Instead, bonds are often traded between investors, with their prices rising and falling in reaction to prevailing interest rates. When rates fall, people tend to bid up bond prices. After all, if banks are offering 2%, a 5% bond will be appealing. When interest rates rise, newer bonds with higher interest rates will be more appealing than older bonds with lower rates. If you hold a bond to maturity, you'll generally experience little to no volatility, but if you're dealing with bond mutual funds or are buying or selling bonds in the secondary market, know that their prices can indeed rise and fall, and meaningfully.

4. Stocks

You can generally get better returns than bonds when you opt for stocks. Indeed, according to the research of Wharton Business School professor Jeremy Siegel, stocks outperformed bonds in 96% of all 20-year holding periods between 1871 and 2012, and in 99% of all 30-year holding periods.

Check out this data from Siegel, who has calculated the average returns for stocks and bonds and Treasury bills between 1802 and 2012:

Asset Class Annualized Nominal Return
Stocks 8.1%
Bonds 5.1%
Bills 4.2%

(Data source: Stocks for the Long Run by Jeremy Siegel.)

The annualized rate for stocks from 1926 to 2012 (a period you might find more relevant to your life) was 9.6%, by the way, versus 5.7% for long-term government bonds.

Let's pause now, and see what various growth rates can do for you over some long periods. Remember that bank accounts will tend to offer relatively low returns, topped by bonds, which are generally outpaced by stocks. To very roughly approximate their returns, let's see money grows at 2% (for bank accounts these days), 5% (for bonds), and 8% (for stocks):

$10,000 Invested Annually, Growing for Growing at 2% Growing at 5% Growing at 8%
10 years $111,687 $132,068 $156,455
15 years $176,393 $226,575 $293,243
20 years $247,833 $347,193 $494,229
25 years $326,709 $501,135 $789,544
30 years $413,794 $697,608 $1.2 million

Data source: Author's calculations.

If you like the idea of investing in stocks, but don't have the time, interest, or skills to study them, choose which ones to invest in, follow them, and decide when to sell, you can do very well simply parking your long-term dollars in one or more low-fee, broad-market index funds. Each tracks a particular index, giving you its approximate return. The Vanguard 500 Index Fund (NASDAQMUTFUND: VFINX), for example, tracks the S&P 500 index, which is made up of 500 of America's biggest companies that together represent about 80% of the entire U.S. stock market's value. You can go even broader with the Vanguard Total Stock Market Fund (NASDAQMUTFUND: VTSMX), which encompasses all of the U.S. stock market, including small companies, or the Vanguard Total World Stock Index Fund (NASDAQMUTFUND: VTWSX), delivering the world market.

Those are examples from Vanguard, but there are more than a few other brokerages and fund families offering low-cost index funds, too -- very possibly including some available to you via your brokerage or workplace. You can also opt for exchange-traded funds (ETFs) that focus on the same indexes, such as the SPDR S&P 500 ETF (NYSEMKT: SPY), Vanguard Total Stock Market ETF (NYSEMKT: VTI), and Vanguard Total World Stock ETF (NYSEMKT: VT).

You can balance out your portfolio with some bonds via bond-focused index mutual funds and ETFs, too. The Vanguard Total Bond Market ETF (NYSEMKT: BND) is an option that can fit that bill.

Part of what makes many stocks great is that large and/or established companies tend to pay dividends, and when dividend payers are healthy and growing, they tend to increase their annual payout over the years. Thus, you might buy 100 shares of a stock that's paying $2.00 in dividends per year (total annual payout: $200), but if it hikes its dividend by about 5% annually, it could be paying $3.25 or so a decade later, for an annual dividend haul of $325.

5. Real estate

Real estate is another way that your dollars can make more money for you. You can buy a home, typically via a mortgage, and build equity in it over time. It's likely to appreciate in value over time, too.

But don't assume that real estate investments will keep pace with, say, stocks. According to Yale economist and housing expert Robert Shiller's extensive data -- spanning 100 years from 1890 to 1990 -- the value of American homes, adjusted for inflation, didn't really rise much at all over the entire century. In the post-war period since World War II, the numbers are a bit better, with home prices averaging annual growth of about 5%, which, adjusted for inflation, is closer to 1.5% or 2% annually.

Over the past 20 years, home values have grown by about 4% annually, on average -- but that's pre-inflation. Inflation's long-term average is about 3% per year, reducing that 4% annual gain to, on average, around 1%.

Remember, also, that many homes in various places in the U.S. actually lost value over both short and long periods. So it's good to think of the home you buy as a valuable property in which to live, one that provides shelter and stability. Don't think of it as a surefire path to wealth.

Think twice about making money as a landlord, too, as that can also offer meager returns and a lot of headaches -- especially for those without the temperament for it.

6. Gold

Are you thinking you'll make a lot of money by buying gold? Well, be careful. Yes, some people who time it right do succeed at that, but over the long run, it's not a great wealth-building approach. Remember Jeremy Siegel's data about stocks and bonds, above? Here's the same table, with an entry added for gold's performance between 1802 and 2012:

Asset Class Annualized Nominal Return, 1802 to 2012
Stocks 8.1%
Bonds 5.1%
Bills 4.2%
Gold 2.1%
U.S. Dollar 1.4%

(Data source: Stocks for the Long Run by Jeremy Siegel.)

To give you a sense of gold's volatility, check out some sample prices per ounce:

Year Price per Ounce at End of Year
1950 $40
1960 $37
1970 $39
1980 $595
1985 $327
1990 $386
1995 $387
2000 $273
2005 $513
2010 $1,420
2015 $1,060
2018* $1,256

Data source: *As of July 5, 2018.

Yes, gold has clearly appreciated significantly, from 20 years ago to today, but a little number crunching shows that an increase from $513 to $1,256 over 17 1/2 years is the result of a 5.25% average annual growth rate.

You have many choices when you want to put your money to work for you. The more you learn about your options, the more effectively you can build wealth. Remember that despite occasional slumps, over long periods, it's hard to top the performance of the stock market.