The average savings account with a traditional bank earns about 0.01% in interest. If you have $10,000, that’s a whopping $1 of interest for the WHOLE YEAR. What if you were able to earn $1 of interest PER DAY instead?
While rising interest usually means that borrowing money is more expensive, it also means that savers can earn even more interest in their bank accounts. Utilizing a high-yield savings account can not only protect your hard-earned money but also earn income and continue to grow.
Here is an overview of high-yield savings accounts:
Where can you find them?
Your neighborhood bank down the street is likely only paying 0.01% – 0.02% in interest. Online banks are able to offer competitive interest rates since they don’t have physical locations and have lower operational costs than traditional brick-and-mortar banks.
Some of these include Ally Bank, SoFi, Apple (with Goldman Sachs), Betterment, and Wealthfront. Current interest rates (as of May 2023) are 3.75% – 4.55%.
Is your money safe?
After recent bank failures, such as Silicon Valley Bank and First Republic, there is a general fear and skepticism about the banking system. However, this should not stop you from saving and earning a competitive interest rate.
When researching banks, it’s important to ensure that the bank is FDIC insured. The Federal Deposit Insurance Corporation insures banks and account holders’ accounts up to $250,000 ($500,000 for a joint account). You can use this tool here to check if a bank is FDIC insured.
Is your money locked up?
Unlike CDs (Certificate of Deposit), there is no fixed time period that your funds must stay in the account. This means that you can withdraw funds when needed and not be subject to early withdrawal penalties.
It’s worth noting that some CDs are earning even higher interest rates than high-yield savings accounts. Banks such as Marcus (by Goldman Sachs) and Ally Bank are paying as high as 4.8% in interest. The terms for these CDs typically range from 1 – 3 years.
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!
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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.