Did you know that you can earn 50 – 100x more interest, just by choosing the right type of savings account? And no, these are not invested in the stock market or cryptocurrency.
Whether you are just starting to save or already have a substantial nest egg, a high-yield savings account is a great way to save for goals, protect your money, and earn more interest.
Here is an overview of high-yield savings accounts:
Where can you find them?
Not all banks offer high-yield savings accounts. If you currently bank with Chase or Wells Fargo, don’t expect to earn more than 0.01% – 0.02% in interest. Popular banks that offer competitive interest rates include Ally Bank, CapitalOne, Marcus, and Discover. Current interest rates (as of June 2022) are 0.80% – 0.90%.
You can stay up to date on the new interest rates by checking out sites like Bankrate or NerdWallet. While rising interest rates can mean more expensive mortgages, it also means higher returns for your savings account!
How much should you save?
The answer is very simple – it depends! Determining how much cash is appropriate to keep in a high-yield savings account is very personal and depends on a few factors:
- How much do you need for an emergency fund?
- Do you have any upcoming expenses?
- Do you have any tax payments you need to make?
- Are you planning to buy a home or car in the near future?
While you shouldn’t expect to receive high returns on your cash, you can expect one thing – safety. Savings accounts are not subject to market volatility and are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000.
What’s the catch?
High-yield savings accounts seem like a no-brainer, so what’s the catch?
The first is that savings accounts have monthly withdrawal limits. Regulation D was a federal law that limited withdrawals and transfers to six per month from a savings account. This was suspended due to COVID, however, most banks still follow this practice and will charge you fees if you exceed it.
The second is that most banks with high-yield savings accounts do not have physical locations. This means that you can’t walk into a local branch to deposit or withdraw cash, and will need to take care of transfers online.
Finally, you’ll have to wait in order to get access to your cash. It typically takes 1 – 2 business days to transfer funds from your high-yield savings account to a checking account, where you can withdraw cash through an ATM.
High-yield savings accounts are an important tool to save for short-term goals and earn higher interest rates. If you would like to work with a financial planner to walk you through your options, I would love to help you!
To learn more about becoming a client, schedule a complimentary meeting now!
Disclaimer: This blog is for informational purposes only, and should not be considered advice or recommendations. All opinions expressed herein are solely those of Amaral Financial Planning, LLC, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made to another parties’ informational accuracy or completeness. You should consult your financial advisor, tax professional or legal counsel prior to implementation.