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Savers need to be careful thinking they can get a higher yield without taking on additional risk to their capital.Credit:Shutterstock

Those who monitor online savings account interest rates and are prepared to shift their cash between bank accounts regularly can probably earn close to 2 per cent on the money. However,term-deposit rates with major lenders are at 1.5 per cent,or less,on periods of up to two years.

It is still possible to obtain more than 2 per cent interest by going to a smaller,online-only provider,or locking away your money for a longer time period.

The interest rates on offer are a pittance compared to historical levels but at least there is no risk to capital. That's because the first $250,000 on deposit with an “authorised deposit-taking institution” – such as a bank,mutual bank,credit union or building society – is protected by the federal government's deposit guarantee.

Those with small savings or who are saving for only a short period have little choice but to keep their cash on deposit,despite the poor rates on offer.

However,those with larger savings could look at diversifying and taking some risk with a portion of their capital,in the expectation of higher returns.

People who do not need to access the money for some time could invest a part of their savings in Australian shares,as long as they have the time to ride out any setbacks in the sharemarket.

Australian shares pay a yield,on average,of about 4.5 per cent and,over the longer term of at least five years,there is every likelihood of capital gains,too.

Add in the benefits of franking credits and the"grossed-up yield"on some shares is more than 6 per cent,depending on the income-tax bracket of the investor.

However,just because a company's shares have a high yield does not always make them a good investment.

The shares could have a high yield because the share price has fallen,as investors take a dim view of the future prospects of the company.

Exchange Traded Funds (ETFs),which are listed on the Australian sharemarket,are a good way of obtaining instant diversification. They track all sorts of markets,including Australian shares,and by their definition cannot go broke.

Another option in the hunt for yield is peer-to-peer lenders. They are usually online platforms that charge borrowers lower rates of interest than they would pay on bank loans,while lender-investors earn higher interest than they could get with a bank term deposit.

The best course of action depends on individual circumstances. If in doubt,seek some professional financial advice.

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