2min
Jul 25, 2024
With many families feeling the pinch of an inflated market and struggling to retire with financial freedom, more people are looking for ways to make their money go further—faster.
For those seeking a savvy method for earning more cents on each dollar, a high-yield savings account offers an alternative to the low interest rates that traditional banks offer.
What is a high-yield savings account?
High-yield savings accounts, typically offered by online banks and credit unions, provide a significantly higher interest rate than traditional banks. While traditional banks, such as Wells Fargo or Chase, offer interest rates around 0.01% or 0.02% APY, high-yield accounts offer rates upward of 4.00% APY.
When to use a high-yield savings account:
While high-yield accounts have their merit, they may not be for everyone. Many banks offering an impressive APY are fully online, meaning there are no brick-and-mortar stores available. This may be worth considering if you prefer a personalized touch to your banking experience.
However, for many, the benefits of a high-yield account outweigh the potential insecurity of online banking.
For those looking to make their money work for them through interest, a high-yield account offers both flexibility and excellent returns without the fees or length required of long-term investments. We believe this makes it a perfect option for sinking funds or emergency funds.
Benefits of a high-yield savings account
There’s a reason high-yield savings accounts are growing in popularity. With an attractive APY, minimal requirements for opening an account, and an abundance of options available for consumers, there are many reasons to choose a high-yield account for your savings.
Liquidity of Funds
While investment options such as ETFs or mutual funds can offer a greater return through the power of compound interest, many of these methods win over the long term. The time required makes those methods ideal for those who don’t intend to withdraw the money for a handful of years, or even until retirement.
Alternatively, high-yield savings accounts are liquid, meaning you can withdraw your money as you desire without incurring penalties. Of course, the greater your savings balance is, the greater your interest return will be.
Alternatives to high-yield savings accounts
CDs or Certificates of Deposits are another conservative approach to earning higher interest than traditional savings accounts. Unlike high-yield accounts, funds deposited into a CD cannot be touched for a specified time without a penalty. The APY for CDs often varies by bank/credit union, amount of funds deposited, and the chosen length of time for it to mature.
Plan for Your Future Today
High-yield saving accounts are just one tool to leverage in creating a powerful retirement strategy. To learn more about preparing for your financial future, connect with Savvly, the first market-driven pension designed to meet your long-term income needs at a fraction of the cost of an annuity.
