When Are Savings Put to Work to Earn Income?

Safe Savings

Putting your money into a "safe" investment, like a savings account, a certificate of deposit or a savings bond, will earn you a small amount of interest on your money. Though rates can vary, you'll typically find rates from 1 to 4 percent. Your many can begin earning this interest right away, but it will take a large amount of money to generate a livable income. If you put your money into a CD or a bond, you won't have immediate access to it, as you would by putting it into a savings account.

Money invested in the stock market will often give you higher returns over time, but the market is volatile. How much income stock investments generate depends on the types of stocks you purchase. Within a short period of time, it's possible to start generating an income, but it's also possible to lose the money that you've invested. Stocks are usually a smarter move for those who don't expect to need the money for several years.

Your ability to generate an actual income from your savings rather than simply adding a few extra dollars to your savings each month relies on you having a significant nest egg. You can use a retirement calculator to help determine how much money you need. As an example, in order to withdraw $30,000 annually for 25 years, Bankrate suggests that you would need around $360,000 invested and earning a rate of 7.5 percent per year.

Another alternative for putting your savings to work for you is to invest directly into a business idea. If you invest your money into another person's business idea, you could earn a percentage of the business profits without having to do much work yourself. If it's your own idea, you may need to do some of the initial legwork, but it could later continue to earn you an income. As with investing in stocks, though, this method will not guarantee that you earn an income from your savings.