If you've worked hard and paid off your debts, you may be thinking about putting your excess cash to work. After all, the savings accounts in which you've stored the bulk of your funds are currently producing rock-bottom annual yields of less than 1 percent. In historical terms, such yields are unprecedented. Even in the current low-inflation environment. an annual return of 1 percent may actually produce a negative yield after accounting for inflation and taxes. In other words, the money in your savings account could be slowly losing its value. If you'd like to reverse this worrisome trend, you have several options at your disposal.

First, savings bonds may offer better yields without exposing your hard-earned funds to undue amounts of risk. Most savings bonds are government-issued vehicles that pay low but fair rates of interest in exchange for a sizable initial investment. Since many savings bonds require minimum investments of $5,000 to $10,000, they may not be suitable for smaller investors. Then again, many mutual funds often come with minimum-investment limits that can reduce their overall attractiveness.

Mutual funds are both riskier and more rewarding. Most mutual funds are made up of baskets of stocks, commodities and other investment vehicles. In exchange for a management fee. the administrator of a mutual fund buys and sells these investments on behalf of the fund's holder. If you own a mutual fund, you won't have to worry about actively managing your investments. However, stock market downturns can affect your returns and may even wipe out some of your initial investment amount.

CDs are the most conservative of these three savings and investment vehicles. In fact, CDs aren't typically regarded as investment vehicles. They're basically long-term savings accounts that lack the liquidity of regular checking accounts. To offset this disadvantage, they tend to pay higher rates of interest than regular savings accounts.

However, most CDs pay unimpressive rates of interest. If you invest in a CD, you'll need to keep your money locked up for a fixed term. If you withdraw your funds before the term expires, you'll be subject to a stiff withdrawal penalty and may lose much of the interest that you've accrued. Interest rates on one-year CDs may range from .5 to 2 percent. Interest rates on five-year CDs may range from 1.5 to 3 percent. Certain longer-term CDs may come with even higher rates of interest.