You want to start putting away savings, but you’re not exactly sure where to put them. Why not a high-yield savings account? This type of savings account comes with some really appealing benefits that you might want to access.
Higher Interest Rate
One of the biggest benefits of a high-yield savings account is that it comes with a higher interest rate than a standard savings account. So, your account balance can grow with compounding interest, giving you an even bigger pile of savings over time. A high-yield savings account typically has an annual percentage yield (APY) between 2-5%.
In comparison, the APY for a standard savings account is below 1%. Standard savings accounts from major national banks like US Bank, Wells Fargo and Chase Bank all offer APYs of 0.01%.
So, your savings have a greater potential for growth inside of a high-yield savings account than a standard savings account.
Low Risk Investing
High-yield savings accounts are low risk investments. They aren’t volatile investments like cryptocurrency assets, which can plummet in value at a moment’s notice. Your earnings in this savings account won’t drop suddenly. The only actions that will impact your account’s balance will be withdrawals that you make from the account. Your investment is also safe in the worst-case scenario: bank failure. As long as your bank is FDIC insured, your deposits in the high-yield savings account should be covered. The FDIC insures deposits up to $250,000 for individual accounts. For joint accounts, it covers up to $500,000 in deposits. So, if your bank fails, like the recent collapse of Silicon Valley Bank, you can rest assured that your money won’t disappear into the ether. Your deposits will either be transferred to an account at a different bank or sent to you via check.
Accessible
There are other savings vehicles out there that offer high APYs, like Certificates of Deposit. One benefit that high-yield savings accounts have over them is they are much more accessible. As a user, you can make a withdrawal or transfer from your account at a moment’s notice. In this case, it is no different than a standard savings account. The funds are liquid, accessible and fairly unrestricted.
This is what makes a high-yield savings account such a good storage space for an emergency fund. When an emergency expense strikes, time is of the essence. You want to be ready to make a payment right away. With a high-yield savings account, you can access the money that you need for this urgent payment as soon as possible.
If you make the mistake of putting your emergency savings into a tool like a CD, you might be out of luck when disaster strikes. CDs are savings tools that lock away your funds for a set amount of time to help them grow with interest. This set amount of time could be a few months or a few years. You’re supposed to access the funds after this allotted time when the account officially “matures.”
With inaccessible savings, you will have a difficult choice to make. You can either undermine your savings and try to make an early withdrawal from your CD (resulting in an early withdrawal penalty),or you can leave your savings inside of the CD and choose an alternative payment method for your emergency expense. This could mean charging the expense to one of your credit cards and then working to pay down the balance later. Or this could mean looking into online loans through CreditFresh as a solution to your problem. As long as you meet the eligibility requirements, you can apply for a personal loan through the website.
With an approved personal loan, you could pay off an emergency expense without the help of savings. Once the payment is made and the emergency is resolved, you can redirect your focus toward a repayment plan.
Do you want to reap these benefits? Then it’s time to open up one of these accounts and start saving.
