High Yield Savings Accounts

What is a high yield savings account? Surprisingly, not many people are familiar with them. Most people will park their money in the same regular bank savings account they’ve had for years without a second thought. It’s where their direct deposit from work has always gone, it’s labeled “savings” by the bank, that’s where your savings go right? Growing up, going to school and progressing through different jobs, I never once thought about the interest my money made in my bank account. All I knew is I needed a bank for my direct deposit, and I need a safe place to keep my money. I only wish I knew how terrible my banks interest rates were. According to the FDIC, the national interest rate of savings accounts is only .09%, and if you’re OK with letting the bank loan out your money for the little of return by all means keep your money there. Otherwise, keep reading.

While most banks give you .09% on your money in savings, a high yield savings account typically gives you around 1.5% APY. It doesn’t sound like much, but this is amazing. A few years ago I convinced my girlfriend (now my wife) who is a habitual saver, to move the majority of her savings from her standard savings account, over to a high yield savings account. The first month’s interest payment was more than she got in an entire year from her traditional bank. She was hooked, and now that we’re married, we have opened a joint account that earns 1.5%. We pooled all our savings and have an automatic monthly deposit that goes into this account. We have been earning $50 + a month just for parking our money there. Now keep in mind, this isn’t our primary investing strategy, this is primarily a house/emergency fund. This is money that we won’t need immediately, but we can withdraw and have in our hands within a day or two.

One other thing to be aware of. Many people will argue that inflation outpaces these savings rates, and they’re correct. Inflation fluctuates in the U.S. every year, generally from 1.5% to 3.0% a year. Which means even in these accounts, your money will be worth less next year. However, we aren’t using this as an investment tool, it’s simply a place to park money that you don’t want to risk losing in the market, and that will slow down the effects of inflation. I don’t know about you, but I would still rather get 1.5 interest on my money than .09%.

Why consider a high yield savings account?

Consider a high yield savings account if you want a higher return from your bank.

If you want your emergency fund to grow, with no chance of losing value.

If you want your money to grow, but still want the ability to withdraw if needed with no penalty.

You like easy online banking

Make sure the bank you choose:

Is FDIC insured. (this means your money is guaranteed up to a certain amount by the government, even if the bank goes under)

Has no fees or penalties

Has reputable customer service

My Choice

I went with Barclays, and would easily recommend them to anybody. We’re currently getting 1.5% there, and I’m plenty happy with that. They also have an easy to navigate and intuitive website. With an easy to use website, I’m never frustrated or annoyed trying to transfer money or use any of there other features. They also have an app with mobile deposit, so you can deposit checks straight into your high yield savings account.

Check them out at https://www.banking.barclaysus.com/online-savings.html

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