14% returns in a year is not easy. You need to put in effort, especially when the average US stock market goes up 10% a year with plenty of volatilty, +20% some years and -20% some other years.
Why Savings Account are not optimal by themselves
The good old savings account. If you put all $25k into a savings account, you could yield anywhere from around 0.01% to 3% annual percent yield (APY). This would be $2.5 to $750 of interest per year before taxes. Interest is considered ordinary income, so whatever your marginal tax bracket is, that will be what it gets taxed at. Assuming your federal taxable income is between $38,701 and $82,500:
Federal Tax = 22%
State Tax = 0% to 9%
FICA Tax = 7.65%
Your total marginal tax rate would be around 30% – 40%. I will assume the worse case at 40%. Therefore, your after-tax APY is 0.006% – 1.8%. This doesn’t even keep up with an average inflation of 2%. 🙁
This is why most people say to keep 3 – 12 months of expenses in cash, and invest the rest. Investing usually refers to CDs, bonds, stocks, real estate, p2p lending, your own business, and much more. However, I want to point out another way to use your cash, called churning.
Making 14% with much less risk
Banks and credit card companies often offer promotions and sign-up bonuses. The popular churning of credit cards is good, but also has limits as companies add stricter regulations to prevent churning, and the impact on your credit score. However, another method of churning is by opening bank accounts that offer bonuses! Here are two examples available in January 2019. Go ahead and try them, YMMV.
Discover
$200 for depositing $25,000. No fees or requirements to keep your money in there. 0.8% return that takes maybe a few days for your transfer to go through is pretty good!
Reddit forum with more info and links to the deals:
https://www.reddit.com/r/churning/comments/agk0zg/discover_savings_bonus_150200/
Chase
Chase had $600 for opening a savings and checking and keeping $15000 for 90 days, and having direct deposit for the checking account to avoid fees. 4% return in 3 months.
Reddit forum with more info and links to the deals:
https://www.reddit.com/r/churning/comments/aeb702/chase_600_checking_savings_bonus/
Summing up how to make 14% returns
If you execute 3 deals of similar value of each of the two above in one year, you would make 14.4% return! This is fantastic, compared to the average stock return of 10% average over the last 90 years! This has basically no volatility so you won’t lose any money. The only risk is that banks stop giving good deals for you to churn, and inflation bites into your cash by a percent or two depending on your savings account interest rate. So, if you have around 3 – 12 months of expenses saved in cash, and don’t want to start putting everything into stocks, or want to keep more cash for buying a house or other large purchase in the near future, try churning!