The 3-Minute Tutorial On High-Yield Savings Accounts
It’s well known that we should practice good adulting habits like eating our leafy greens, flossing daily and putting in place a good savings plan. I’ll be honest; sometimes these items are not top of mind. They might get buried on a to-do list and I file them away under “best intentions.” But with all the coverage in the press lately of emergencies and preparedness, I felt I should check one item off of my list. And, it seemed like a good time to investigate the best options around savings and investments to make sure that I had a solid rainy day fund set aside.
To that end, I started reading about the world of online high-yield savings accounts. True, initially this reading felt about as fun as flossing. But I did get excited about what I found out. Let me save you the trouble of doing the research and give you my 3- minute tutorial on this investment strategy.
What is a high-yield savings account?
A high yield savings account is a savings account that pays on average about 20 to 25% above the national savings account. Typically the best rates come from online banks (many that may be new to you) and you’ll earn a better return on your money over time. The accounts are insured or guaranteed based on the model and tend to be flexible, allowing you to access cash as needed. Because these entities are online, setting up an account is as simple as signing up on your computer and making your first deposit.
Who is it best for?
High-yield savings accounts work well for anyone that wants to diversify their portfolio and make a portion of their money work a bit harder. These accounts can be used as emergency funds or specific project funds where money can be set aside to reach a particular financial goal. With an initial deposit and regular contributions, you’ll put together a robust savings program in short order.
3 Options To Consider
Betterment is a high-yield cash account that earns a variable annual percentage yield or APY of up to 1.84%. The minimum deposit is $10 and there are no fees or account limits. Betterment is not a bank, but rather an SEC-registered investment adviser.
Citizens Access provides a high-yield online savings account that earns an APY of up to 1.70%. The minimum deposit to get this return is $5000 without fees. Citizens Access is a part of the larger institution, Citizens Bank.
Tellus is a high-yield investment account that earns 3% APY. The minimum deposit is $200 and they’re able to provide such a high return as their overhead is low without any brick and mortar costs to consider. The accounts are backed by real estate holdings and interest is paid daily.
How to decide which investment is right for you?
I’ve covered the top line information of what to look for when evaluating these accounts here: interest rate, banking minimum and fees. In addition it’s wise to consider how easy it is to move your money around, how often interest is compounded, and how easy it is to get started and use the site’s online tools.
I also wanted to see how each APY would affect my money over time and used this simple calculator to compare. This would be worth checking out as a quick and easy way to evaluate options. https://www.mybanktracker.com/apy-calculator
The bottom line is it’s never been easier to start a savings program from the comfort of your own home. The idea of funding specific financial goals in a separate account seems like a smart way to earmark funds and simplify personal accounting. Given how easy it is to get started, I think it’s one thing I can simply check off my list today. I’ll work on the flossing and leafy greens tomorrow.
