updated September 20, 2022
You probably have a brick and morter checking account, which typically comes with a savings account. So we link our paychecks to our checking account, then occasionally shovel some of that into that linked savings account. Just like that, we think we’re doing our own due diligence saving money.
But what if I told you that there is such thing as a savings account that can earn you MORE? These are called high yield savings accounts.
What is a High Yield Savings Account?
A high yield savings account (HYSA) is a savings account that you can open that earns above average yields as compared to your basic savings account that you may have gotten with your checking account.
Your current basic savings account probably has an annual percentage yield (APY) of only 0.01%. This means that as your money is sitting in your savings, earning you back next to nothing, it’s losing its value over time due to inflation.
Why Should I Open a High Yield Savings Account?
Other than the obvious reason to accrue more interest, I like to use my HYSA for my emergency fund. An emergency fund is crucial to make sure you’ve got cash at hand for any unexpected life events that may come your way.
Some people keep at least $1,000, and some recommend at least 3-6 months of living expenses. Either way, you should have at least some cash readily available, but don’t let it go to waste and lose its value in a basic savings account. With compound interest, the your money will grow much faster than a regular savings account.
How Do I Open a High Yield Savings Account?
Some of these banks do have brick and morter locations, but most of them are actually online banks. So you can transfer your money into these accounts from the comfort of your couch!
Make sure you look at the fine print before you open a HYSA, as some of them require a low minimum deposit. They usually are no more than $100.
Which High Yield Savings Account Do I Choose?
They’re all great, but I personally use CIT Bank’s Savings Builder, which has a 2.1% APY with $100 minimum opening deposit. There are other great ones too, such as Ally and Alliant, who offer comparable rates. But as you can see from the chart, they’re much better than your average!
Tip: Make sure the bank you are using are FDIC insured (which all of these that I mention above are, don’t you worry). That basically means your deposits are protected by the federal government in the case of bank failure. The chances of that happening are slim, but better safe than sorry!
Read more about saving money in these blog posts:
- Tips on How To Achieve a >50% Savings Rate
- Values Based Spending – Determining Your Core Values
- 12 Tips To Save This Holiday Season
- How I Curbed My Spending Habits As A New Grad PT
If you want to learn more about how to optimize your money, let’s work together to help you on your personal finance journey! Click here to sign up for your FREE 20 minute consult.
Note: I am not a certified financial advisor/planner or a certified financial analyst or a CPA or an accountant or a lawyer. Remember, I am an allied health professional, just like you! This website/blog is for entertainment and educational purposes only. Please consult with your financial advisor(s) regarding your personal finance, investment, and tax matters.
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