Expert: Gina Boykin - 8/6/2007

Question
Hello Gina is there such an investment say with a bank that you could get daily compounding, and also get federally insured. Thanks Mike

Answer
The only products that are "federally insured" are those offered by a bank that is FDIC (which should be most, if not all banks).  What this means is that if the bank goes bankrupt, the federal government will make sure that you get your money.  If you are interested in a particular bank, the FDIC symbol should be shown on their website.

You have a choice of a savings account, a certificate of deposit, and a money market account.  Some banks compound interest on a daily basis, while others may be monthly, quarterly, or semi-annually.  If you visit www.bankrate.com and click on the "Compare Rates" tab, you can see the rates and compounding method for banks across the country.

Savings bonds are another low-risk, safe investment, because you are basically loaning money to the federal government.  These can be purchased through most banks, or online at www.treasurydirect.gov.  Savings bonds can be purchased for as little as $25.  Interest accrues semi-annually, but they do have tax advantages - the interest you earn is exempt from state and local taxes.  If you want more info on savings bonds, you can read more on the Treasury Direct website.

Banks offer other investment products, such as mutual funds and even stock investments, but these are NOT federally insured.  However, there is one type of mutual fund that is considered very safe.  That is the money market mutual fund.  This fund invests in things like CDs and government treasuries.  The fund's purpose is to provide interest while maintaining safety.  For more info on money market mutual funds, check out www.investopedia.com.

I hope I answered your question!  Best wishes in all of your saving and investing!

Here's a good compounding interest calculator so you can play with the numbers, compare different products and watch your money grow!
http://www.moneychimp.com/calculator/compound_interest_calculator.htm