The Snowball Wealth Financial Roadmap
After the last year of soaring inflation and low yields on savings accounts, many people are looking for a place to safely store their cash and still get a better return than a traditional savings account. We recently wrote an article about earning more with I-bonds. If I-bonds don’t appeal to you, you can also consider a high yield savings account.
A high yield savings account works like a regular savings account except it pays a higher interest rate. This allows you to earn more on your money.
If you are saving for a goal in the near term and want to earn more on your savings, a high yield savings account is an option. Placing money into I-bonds can be lucrative right now but it locks the money in the account for at least one year and sometimes people need more flexibility than that. Placing money into the stock market can be lucrative as well, but carries the risk of loss over a short period of time. If you are saving for a goal that is short term or may need the money for an emergency, locking it in for a year or taking on risk is not the best option. A high yield savings account offers more flexibility, safety and a higher return than these other options.
Many banks and financial institutions offer high yield savings accounts. The key is to do your research and make sure the bank or financial institution is a good fit for you personally. Let’s take a look at two of the many offers that are available right now:
Right now, Ally is offering a 1.25% annual percentage yield on their savings account with a $0 minimum and $0 minimum opening deposit. This rate is higher than what is typically offered for a regular savings account.
Another high yield savings account is through Marcus Bank. They are currently offering a 1.20% annual percentage yield. Marcus also offers these accounts with no minimum deposit and no fees.
An annual percentage yield is the amount of interest earned over the course of a year. One good thing about the interest you earn in a high yield savings account is that it compounds. Compound interest allows you to earn money on both the funds you place into a high yield savings account and the interest the account earns.
One thing to look out for is making sure the bank is FDIC insured. FDIC stands for Federal Deposit Insurance Corporation and this insures your money up to $250,000 per depositor at each bank. You should also read the fine print to make sure that you understand any potential fees or minimum balance requirements. If you are curious about what accounts others are using, consider joining our free money community.