If you’re not looking into every way possible to defeat interest rates, you’re going to find yourself behind quickly. Just in 2023, interest rates will rise between 5% and 5.25%. This is compared to the 0.23% average raise in your savings account you get yearly. Your money will continue to lose its worth every day sitting in a savings account. That’s not to say savings accounts are a bad thing. It’s good to always have extra cash on hand for those times you might need it. There are ways to combat interest rates going up, but one way stands out more than others. It offers minimal risk and you’ll see your money grow. It’s time to talk about mutual funds.

What is a Mutual Fund?

A mutual fund is an investment you make with a group of other investors to pool money and invest in stocks, bonds, and anything you can invest in. There’s a money manager or group of money managers who watch the market. They know when to buy and sell anything to help your money grow. The reason a mutual fund is such a great idea is because the average one returns 5% to 15% every year. They’re also considered the least risky investment you can make in the stock market.

Mutual funds rarely fail or go wrong, especially if you invest with one of the main ones. This way, you can be confident your money will continue to grow. On the lowest possible end, your money is going to grow at the same rate interest rates go up. You’ll probably be able to beat interest rates if you find the right mutual fund to invest in. But what should you do about your savings account?

Should You Take All Your Money Out of Savings?

Even though savings accounts can’t keep up with interest rates, you should always have money in one. It’s smart to keep at least two months’ worth of bills in your savings account in case something were to happen and you need the money immediately. While mutual funds are a great way to beat interest rates, it takes around a week to get your money from your mutual fund account to your bank account. This is because you have first to sell part of your shares. Each share goes through the SEC to make sure there’s nothing potentially illegal about the sale. That can take up to two days.

Next, you have to withdraw the money from one account and put it in the next. This can also take two or three days to process. The other issue is the SEC only works Monday to Friday and not on government holidays. So, if you sell something on a Friday, it won’t be processed until Tuesday of the following week. Having money set aside in a savings account allows you to be able to quickly pay for something if you ever need to. Should you ever need to take money out of your savings, make sure you fill it back up to have two months of bills ready before you continue investing in a mutual fund. Another reason it’s good to keep money in savings is because you can build trust with a bank in case you ever need a loan of any kind. Banks like giving loans to those who have shown loyalty over the years and have money already set aside with them. You can’t take out a loan with a mutual fund, so it’s important to keep those relationships strong.

How to Invest in a Mutual Fund

It might feel daunting to think about opening an investment portfolio, but it’s not as hard as it might sound. Places like Charles Schwab and Vanguard are known for having excellent returns on mutual funds with no risk associated. All you have to do is open an account with them and make an initial deposit. After that, you can sit back and watch your money grow. You should also make sure you’re investing and putting money in as often as you can. If you’re the type of person who wants an immediate result, don’t look at the account. It will only slowly go up and won’t make you a millionaire overnight. It’s smart to set an automatic deposit of however much you’re comfortable with whenever you get paid, that way you don’t have to constantly worry about doing it. Mutual funds are the best way to beat interest rates and not take on any risk of investing. Millions of people do it and find security in knowing their money is working hard for them.

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