Where savers can finally earn a decent return

For the past eight years, anyone with a little extra cash to invest has had a problem: Finding a safe place to put it that earned a reasonable rate of interest was nearly impossible.

But since 2015, the Federal Reserve has raised interest rates seven times, each increase by 25 basis points. Suddenly, earning a real interest rate, meaning an interest rate at least equal to inflation, is a viable option. That is, if you know where to look. Here are three good investments for anyone looking to earn more interest on their savings, and two to avoid.

Money market fund

These can be FDIC-insured bank products or mutual funds that come without any government guarantee of safety for your principal. Seven-day yields on taxable MMFs now range between 1.8% and 2%. To get the highest returns, you should start with a minimum initial deposit of $5,000 to $10,000.

Institutional-class MMFs include Fidelity Investments Money Market Class I, which has a current seven-day yield of 2.1 percent but requires a minimum initial investment of $1 million. However, as with many MMFs that require a higher initial investment, if you make withdrawals that reduce your balance below the minimum initial amount, you can keep your cash in the fund.

The great thing about MMFs is that their returns will rise as interest rates rise. This is an important point because the Fed wants to continue raising interest rates at least two more times this year and perhaps a few times in 2019.

Most major financial companies offer FMM, and all allow daily access for withdrawals and deposits without any restrictions. Note that FMMs that are not offered by a bank are registered with the Securities and Exchange Commission as mutual funds and are not the same as deposits in a bank account.

Companies offering non-bank FMMs seek to maintain a stable share price of $1. Most often, they are offered through brokerage accounts. After the Prime Reserve MMF notoriously “broke bottom” in 2008, leading to panic, regulations were put in place to significantly reduce the chance that MMFs would not suffer the same fate during another financial crisis. According to the latest SEC data, the total assets of all MMFs were more than $3.1 trillion.

High yield bank savings accounts

These are accounts offered by FDIC-insured banks and offer a high degree of security. Until recently, most of these accounts had interest rates below 1 percent. With the Fed on course to raise rates in its third year, it’s now possible to find it bank accounts with annual returns of 1.8% to 2.05%..

For example, Salem Five Direct Bank offers an account with an APR of 2.05 percent with a minimum deposit of $100. Goldman Sachs Bank USA’s Marcus High Yield Savings Account offers a current annual return of 1.8 percent with no minimum initial deposit. In each case, the account must be opened online. Check out the best rates on savings and bank accounts at BankRate.

US Treasury bills

If you’re looking for maximum principal security and a good interest rate, consider buying US Treasuries. The current three-month Treasury yield is 1.97% and the annualized six-month Treasury rate is 2.13% as of July 6. These rates can change daily, so check with the US Treasury Resource Center.

You can buy Treasurys at most brokerage accounts. You can also purchase them online at TreasuryDirect directly from the Treasury Department. There is no fee to set up an online account, and you can purchase T-tickets in $1,000 increments.

Where not to put your cash

Stay away from bank certificates of deposit that mature in more than six months for two reasons. First, you should be able to find higher rates on all of the above products. Second, locking in an interest rate for more than three months is not a good idea because the Fed will likely keep rates rising. So if you buy a CD now, interest rates are likely to be higher in six months, and your cash won’t have any gains until the CD matures.

Fixed annuities also deserve some skepticism. They are investment contracts made by insurance companies that offer a fixed interest rate. The interest rate and principal value are backed by the investment portfolio and the creditworthiness of the insurance company.

But these products can be complicated and often hit you with a 5 percent surrender charge that applies to all amounts withdrawn before the end of the three-year term that are more than 10 percent of the purchase amount original Also, as with CDs, it’s not a good idea to lock in a fixed rate on your savings when interest rates are rising.

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• Federal Reserve