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That penny you earned in interest last month? Let’s multiply it by 200.
Important points
- A high-yield savings account can earn you much more interest than a traditional savings account.
- Opening a high-yield savings account is easy.
- Most high-yield savings accounts are available through online banks.
Inflation affects us all. The dollar just isn’t going as far as it did recently. If you need to stretch your budget, you have two choices: more in or less out. A high-yield savings account yields more, and it can be a virtually effortless way to maximize the growth of the money you have in the bank.
Open a high-yield savings account
A high yield savings account pays more interest than traditional savings accounts. A lot more. The big bank on the corner down the street from your house will probably pay one-hundredth of a percent (0.01%). Yes, that’s not zero. But it’s so close, it might as well be.
However, the best high-yield savings accounts pay a lot more. Some pay more than 200 times what the big banks pay. If you’re earning that much interest, you’ll probably notice.
How Much Can You Make With a High Yield Savings Account?
The more money you save, the more interest you earn. But you don’t have to be wealthy to benefit from a high-yield savings account.
Let’s say you have an emergency fund of $1,000. If you leave it in a typical savings account for a year, you’ll make $0.10.
If you put your $1,000 into a high-yield savings account with a 2.20% yield, you’ll make $22.22 in the same amount of time.
Are you a saver with even more money on the side? In this example, a balance of $10,000 yields $222 in a high-yield savings account, compared to $1 in a traditional account. Yes, that’s a dollar. No typo.
How to open a high-yield savings account
Opening a new bank account is easy. High-yield savings accounts are almost always opened online (and some banks that offer them don’t have physical branches anyway). You request and provide information that enables the bank to verify your identity. You will then need to link your existing bank account so that you can make an electronic transfer to fund the account. You do this by either logging in to your current bank online or by providing the routing number and account number.
That’s it. You now have a profitable savings account.
Make more smart moves
To get the most bang for your buck, keep a few best practices in mind:
Limit your transactions. Savings accounts are not suitable for everyday use. Federal law limits the number of withdrawals you can take from a savings account each month (six), and high yield accounts are subject to this law. If you have too many withdrawals, the bank may switch your account to a checking account, and then you lose the high interest rate.
Avoid monthly maintenance fees. Most savings accounts are free, but you don’t have to pay anything for a checking account either. Find an account that doesn’t have a monthly maintenance fee (or one where you can easily meet the fee waiver requirements). Many free checking accounts are available and offer convenient banking at no cost.
Stay under FDIC limits. Once your savings account balance nears $250,000 (hey, we can all dream, right?), look for a second bank with high-yield savings accounts. The federal government insures the money in your account against the possible failure of the facility. However, coverage is limited to the first $250,000 of combined deposits you hold with that institution.
If your money makes zero or almost zero, you are actually losing money. Inflation is real. The $20 in your pocket today will buy less in the future. If your savings aren’t earning a measurable interest, they will lose value over time.
These savings accounts are FDIC-insured and could earn you up to 19 times your bank
Many people miss out on guaranteed returns as their money languishes in a large bank savings account that earns next to no interest. Our selection of the best online savings accounts can earn you more than 19 times the national average interest rate on savings accounts. Click here to discover the best-in-class picks that earned a spot on our shortlist of the best savings accounts for 2022.
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