The 4 Smartest Places to Put Your Money in May 2023

These days, inflation is eating up a lot of people's paychecks. So if you don't have spare cash to go around, that's understandable. But if you do, then it's important to find the right place for your money. One of these options could fit the bill this month.

1. A savings account

A savings account is a great place for money you have earmarked for emergency expenses, or for money you're setting aside for a relatively short-term goal. Right now, savings accounts are paying pretty generously. Some of the best high-yield savings accounts are paying upward of 4% interest. And as long as your bank is FDIC-insured and your deposits don't exceed $250,000, that's a risk-free 4% or more you can earn.

2. A certificate of deposit

Certificates of deposit, or CDs, commonly offer higher interest rates than savings accounts. That's because they require you to tie up your money for a preset period of time and risk penalties for cashing your money out early. Some of the most generous CDs today are paying 5% or more, and many are paying in the 4% range.

You may, however, want to be careful when opening a CD. If you commit to a lengthier term, you could end up losing out if interest rates rise even more once you've opened your CD.

On a positive note, like savings accounts, CDs at FDIC-insured banks are protected for up to $250,000 per person. If you open a CD with a joint depositor, that limit rises to $500,000.

3. An IRA

Contributing to an IRA account is an important thing to do if you want to retire comfortably. Plus, it could result in a nice tax break for you. When you fund a traditional IRA, the amount you put in it exempts income of yours from taxes. For example, sock away $2,000 in a traditional IRA, and the IRS won't tax you on $2,000 of your earnings.

Another perk of putting money into an IRA? You get an opportunity to invest it. The stock market, as measured by the S&P 500 index, has delivered an average annual return of 10% over the past 50 years. If you put $2,000 into an IRA this year, invest it at 10%, and leave it alone for 30 years, it could turn into almost $35,000.

That said, this year, IRAs have an annual contribution limit of $6,500 for savers under 50 and $7,500 for those 50 and over. Be sure to adhere to these limits, and if you have money to invest beyond them, consider a regular brokerage account.

4. A taxable brokerage account

Investing in a regular brokerage account won't result in any sort of tax break. But the nice thing about taxable brokerage accounts is that they don't come with restrictions. Unlike IRAs, there are no annual contribution limits, and your funds are yours to withdraw whenever you want -- without penalty.

To be clear, though, you should only invest funds in a brokerage account that you don't expect to need for a good number of years. The reason is that the value of your portfolio might fluctuate due to market conditions, so you'll want to give yourself time to ride out any potential downturns that could ensue.

Where should your money go this month?

Clearly, you have plenty of choices when it comes to finding a home for your money. If you don't have a complete emergency fund -- enough money to cover three months of essential bills -- then your best bet is to put your money into a savings account. But from there, you have choices, so think about your goals for your money and how much risk you're willing to take on.