How to earn interest on money

• The simplest way to earn interest is through savings accounts, CDs, or bonds.
• Monthly interest options exist, but APY shows the real growth.
• Long-term investing builds the most wealth through compounding.
• Safe accounts give stability, while investments bring higher risk and higher potential.

The easiest way to earn interest on money is by putting it into a bank product like a savings account or CD (certificate of deposit) — call your bank (or visit their website/app), make a deposit, and you're all set. But is that actually the best way to do it? Usually, that's the starting point for most people. Banks use your deposits to fund loans; in return, they pay you a percentage — your interest.

But today, you're not limited to just traditional banks. Online banks, credit unions, and even fintech apps now offer competitive rates, sometimes multiple times higher than iconic banks. The key is shopping around to ensure your money isn't just sitting somewhere earning almost nothing.

You can earn interest on your money by choosing where to allocate it based on how much risk you're comfortable with. Usually, the risk is directly correlated with the amount you can earn on a given investment. If you want total safety, go for FDIC-insured savings (US) or CDs. If you want higher growth, bonds, dividend stocks, or even real estate might be worth exploring.

Examples of common interest-earning options:

• High-yield savings accounts — safe, flexible.
• Certificates of deposit (CD).
• Government or corporate bonds — more commitment, steady payouts.

There are a lot of places to put your savings, but if we had to boil it down, there are three of the best ways to earn interest on your money. They're not equal — each has its own pros, risks, and quirks — but together they cover the main strategies people actually use.

High-yield savings accounts

The first one is the simplest: high-yield savings accounts. These are just like normal savings accounts, but offered mainly through online banks. Because online banks don't have the same overhead as traditional banks, they usually pass that on to customers with much better rates. Instead of earning something tiny like 0.10%, you might get 4% or even 5% APY. The money stays liquid — you can pull it out anytime without penalties. For safety, most are FDIC insured, which means even if the bank failed, the government guarantees your money up to $250,000. The downside? Rates can change fast, so what's "high yield" today might look average a year later.

Certificates of deposit

With CDs, you agree to lock your money away for a set time, like 6 months, 1 year, or even 5 years. In return, banks give you a fixed interest rate, usually higher than a savings account. It's a safe and predictable way to grow money, but the trade-off is flexibility. Pull the cash out early, and you'll face penalties. CDs work well for people who don't need immediate access and want a guaranteed return.

Bonds

Bonds, James Bonds... Sorry, I had to. When you buy a bond, you're basically lending money to a government or a company. They promise to pay you back later and give you interest payments along the way, known as coupons. U.S. Treasury bonds are among the safest in the world, while corporate bonds carry more risk but often pay higher yields. Bonds are a "middle ground," and can provide a steady income if you hold them.

So, savings accounts keep things flexible, CDs give guaranteed fixed returns if you're willing to lock money up, and bonds strike a balance with steady payouts and a bit more risk. The "best" one isn't the same for everyone; it all obviously depends on whether you value safety, income, or flexibility the most.

Yes, it's possible to earn interest monthly. Some savings accounts, bonds, and even dividend-paying investments distribute income every month instead of once or twice a year.

But don't confuse frequency with higher growth. A monthly payout doesn't always mean you earn more overall. The real measure is APY (annual percentage yield), because it can reliably show how the money multiplies when interest compounds. If you want to see what monthly vs. yearly compounding looks like in practice, run your data through our savings calculator 🇺🇸.

APY can show us the actual yearly return on your money, with compounding included. It’s more accurate than just looking at an interest rate.

How does APY help us learn how to earn interest on money? Let's look at an example. Two accounts might both offer 5% interest, but one compounds annually and the other monthly. The monthly compounding account will end up paying you more over time. APY reflects this difference in a single number. If you're serious about comparing options, don't skip it!

The best way to build wealth from interest is through long-term investing. While savings accounts are safe, they won't beat inflation over decades. Investments like index funds, dividend stocks, and bonds can.

Our tips for long-term investing:

• Start early — compounding has more time to work, and that's the secret to learn about how to earn interest on your money.
• Diversify — spread your money across stocks, bonds, real estate (maybe even something more risky like cryptocurrencies or startups).
• Stay consistent — don't try to time the market, don't withdraw when you get scared or emotional, don't give up when you lose.
• Reinvest — let your earnings generate more earnings.

Investing gives you the chance to earn far more than a savings account, but it comes with risk.

Pros

• Higher long-term growth potential.
• Passive income streams through dividends or interest.
• More ways to diversify your wealth.
• Helps protect against inflation over time.
• Compounding works much stronger with investments than with savings alone.
• Can be tailored to your goals, from conservative bonds to aggressive stocks.

Cons

• Market volatility can reduce returns.
• Not as safe or predictable as a bank account.

So, how do you earn interest on your money? Start with a safe account to guarantee some growth, then build toward long-term investing for wealth. Check APY instead of just interest rates, compare monthly vs. annual payouts, and don't ignore the power of compounding.

Ultimately, it's your choice where your money goes, and it all depends on your tolerance for risk. Just make sure to follow long-term investing tips from industry experts and read a good guide on earning interest on money before making any moves with your hard-earned savings.