The 4 Smartest Places to Put Your Money in July 2023

Many people are spending down their paychecks month after month due to persistent inflation. And so unfortunately, a large number of consumers are not in a position where they have to think about where to put their extra money.

But you might be in a very different and more fortunate position. And if so, here are some places to think about putting your money this July.

1. A high-yield savings account

Despite a recent pause, the Federal Reserve has been steadily raising interest rates since March 2022. The downside there is that it's made consumer borrowing more expensive. The upside, however, is that it's now possible to snag a competitive interest rate on money in a high-yield savings account -- without taking on any risk.

Many savings accounts are paying upward of 4% right now, which is a great deal considering that you won't have to worry about losing out on any of your principal deposits (assuming you're at an FDIC-insured bank and you're not socking away more than $250,000). And while it's a good idea to monitor savings account rates, since they're not set in stone, right now, banks are paying pretty generously across the board.

2. A short-term CD

While savings accounts are offering generous interest rates these days, those rates are subject to change. On the other hand, when you open a certificate of deposit (CD), you're guaranteed the same interest rate for its entire term, whether it's six months, 12 months, or two years. And many CDs these days are paying around 5% for relatively short terms.

Now one thing you should know is that penalties apply when you cash out a CD early. For this reason, you may want to stick to a shorter-term CD, like a six-month CD. Doing so not only means getting access to your money sooner should you need it, but also, opening the door to the possibility of an even better rate should banks continue to pay generously well into 2024.

3. A brokerage account

You might snag 4% to 5% on your money risk-free by keeping it in a savings account or CD. But over the past 50 years, the stock market has delivered an average annual 10% return (before inflation), as measured by the S&P 500. So if you're all set on emergency savings and are looking to potentially snag twice the return you might get from a bank, then it pays to invest your money in a brokerage account.

Of course, you will need to accept the fact that buying stocks means taking on some risk. And also, it's something you should commit to on a long-term basis.

To put it another way, investing in stocks is very different from putting money into savings or a CD. With a savings account, you can pull your deposits out at any time. With a CD, you can potentially take your money and run after six months, a year, or whatever term you sign up for.

When you invest in a brokerage account, it's best to assume you'll keep your stocks for many years so they can appreciate in value. But let's put it this way: If you were to invest $1,000 in stocks this July and leave your portfolio alone for 25 years, you'd grow your $1,000 into almost $11,000, assuming that same average annual 10% return.

4. An HSA

Healthcare is an expense you might face at any stage of life. So if your health insurance plan is compatible with a health savings account (HSA), it pays to fund one. Not only will you get a tax break on the money you put in, but you'll also get the option to enjoy tax-free investment gains in an HSA and tax-free withdrawals for medical spending.

This year, your health insurance plan must have a minimum deductible of $1,500 for self-only coverage, or $3,000 for family coverage, to be compatible with an HSA. Your plan must also have an out-of-pocket maximum of $7,500 for individual coverage or $15,000 for family coverage.

These numbers will be changing in 2024. But so might your health plan. So for now, see what your current insurance entails and whether an HSA is an option for you.

It pays to put any extra money you have to work this month. Consider any or all of the above choices to make the most of your spare cash.