The 3 Smartest Places to Put Your Money in August 2023

Many people end up spending their entire paychecks month after month, whether on just the necessities or on more superfluous purchases. So if you're someone who has spare cash available, it means you're in a pretty good financial spot.

But it's important to find the right home for your money. Here are three options worth considering this month.

1. A certificate of deposit

Certificates of deposit (CDs) are less flexible than savings accounts because they require you to lock up your money for a preset period of time. But CDs also guarantee you the interest rate you lock in, whereas your savings account's interest rate has the potential to fluctuate.

CD rates are pretty generous these days on the heels of a string of interest rate hikes by the Federal Reserve. You might score somewhere in the vicinity of a 5% interest rate on a 12-month CD, which isn't a particularly long commitment. And remember, funds that are put into a CD are protected from losses, provided that your bank is FDIC-insured and your deposit doesn't exceed $250,000.

2. A savings account

You may not want to commit to a CD right now. In that case, a savings account is another solid option. As is the case with a CD, your principal deposit will be protected for up to $250,000 at an FDIC-insured bank, and your interest rate might be close to or comparable to what a six- or 12- month CD will pay you.

As mentioned above, savings account rates aren't guaranteed to last. Your bank may be paying 4.3% right now, but in a few months, you may be looking at 3.8%. But the great thing about a savings account is that you can reevaluate your options as needed, because you're not making a long-term commitment.

3. An IRA

Some people are shocked to learn that interest earned in a CD or savings account is taxable -- and at a high rate. In fact, you'll pay the same rate on that interest as you will for ordinary earned income. And given today's generous rates, that has the potential to drive up your 2023 tax bill quite a lot.

That's why funding an IRA is a good bet right now. Traditional IRA contributions go in tax-free, so by putting money into one of these accounts, you can exempt a portion of your income from taxes, all the while building yourself a retirement nest egg. If you're going to be putting some of your money into a savings account or CD, then funding an IRA is a good way to minimize or help offset the tax blow.

Plus, IRAs allow you to invest your money in various assets for added growth. And you might, over time, snag a much higher return in your IRA than what any savings account or CD will give you at present, especially if you go heavy on stocks.

It's great to be in a position where you have extra money to put to work. Consider a CD, savings account, or IRA this month -- or a combination of all three.