As interest rates drop, it’s dispiriting to watch the annual percentage yields (APYs) of your savings accounts dry up. Currently, your money is actually losing value by sitting around in a savings account. While the best APY you can find at the moment for a savings account is between 0.50% and 0.66% percent, the current annual inflation rate in the U.S. as of November 2020 is 1.2%. That means you are losing, at a minimum, 0.54% of your money every year. So much for “savings.”
That’s not to say that savings accounts are useless. They are a good way to keep your money easily accessible for paying bills and dealing with emergencies. The general recommendation is to save between 3 and 6 months worth of expenses. If you are planning a large upcoming purchase, you should save even more. However, keeping more than necessary in savings is a waste.
When interest rates are rock-bottom, it can seem impossible to grow your money without resorting to more risky investments. One company attempting to tackle this problem is Worthy Financial, Inc., which owns the subsidiary Worthy Peer Capital. This company creates and sells SEC qualified bonds to help fuel American small businesses. You can buy these bonds at $10 a piece and receive 5% interest on your money.
How do I buy Worthy bonds?
You can get started by clicking here. Basically, you just link a bank account and transfer your money to purchase the bonds. You can choose to invest manually, schedule recurring payments, or auto-invest based on purchase round-ups. By using the referral link, we will both receive 1 free $10 bond as long as both of our accounts remain active and in good standing for 90 days. Who doesn’t want a free $10, plus interest? It’s a win-win.
Who can buy Worthy bonds?
Bonds can be purchased by both accredited and non-accredited investors. Anyone with a U.S. bank account is able to buy them. The minimum amount that can be invested is $10, which will give you a single bond.
Accredited investors are defined as individuals who have made $200,000 or more annually for 2 or 3 years and are likely to make the same amount in the current year or individuals with a net worth of more than $1 million. Non-accredited investors are everyone else. Worthy does not make that determination. You are responsible for managing your investments appropriately.
How many bonds can I purchase?
Accredited investors can buy up to 5,000 bonds ($50,000). Non-accredited investors can purchase bonds worth up to 10% of their annual income or net worth.
How long is the term of the bonds?
They have 36-month terms, but you can withdraw your money at any time without penalty. After 36 months, you can either renew your bonds (or a portion of them) for the same 5% annual interest rate, or you can cash them in and withdraw your money.
Do the bonds accrue compound interest?
Both the bonds and your interest accrue daily compound interest.
What are the fees?
There are no fees or penalties. You can buy bonds and withdraw your money at any time for free. However, as with all interest, you will have to pay taxes on it.
Are Worthy bonds safe?
Worthy bonds are low risk. They are not 100% safe, as no investment is. Money invested in Worthy bonds is not FDIC insured because they are not a bank. However, the bonds are secured by assets with a greater appraised liquidation value than the loan amount, so if a business defaults on their loan, Worthy can sell their assets to recoup the value of the loan. This mean that you are very unlikely to lose money. So far, they have always returned 5% on the money invested with them.
Where does my money go?
Worthy uses your money to provide loans to small businesses to buy inventory and generate accounts receivable. Businesses repay those loans to Worthy with interest, and part of that interest goes to you.
Worthy also invests no more than 40% of its bond sale proceeds across other asset classes including real estate, Treasuries, and CDs in order to diversify its portfolio.
How can I keep track of my interest?
You can see daily, weekly, monthly, and yearly interest reports on Worthy’s website or app, downloadable through the Apple App Store and Google Play Store.
Is the interest rate affected by market fluctuations?
No, the bonds always provide 5% returns regardless of market conditions or whether the Fed adjusts rates.
What has your experience been with Worthy?
My wife and I have been investing with Worthy for over a year. Both the website and the app are easy to use. It is fun to watch your interest increase every day. We have consistently been receiving 5% annual returns. We have also cashed out some of our bonds at different times and purchased more later with no difficulty or fees. The only issue we have had is with the round-up feature. We connected it to one of our bank accounts, but since most of our purchases are made on credit cards, the round-up feature is only activated when one of our credit card bills are paid from the bank account. This is much less frequent than rounding up actual purchases would be. This is a minor issue, though, for us. Overall, we have been very happy with Worthy. It’s nice to receive decent interest without fear of a market crash.