Even before Covid-19 impacted the way most people earn money and conduct business, many Americans prioritized their financial security. But today, almost everyone seems to be wondering how they can best save for the future while also covering their daily expenses.
For some time now, high-yield savings accounts have been the go-to option for short-to-medium term savings. These accounts allow you to earn more interest than you would with traditional options. But before you open an account, you may still be wondering, are high-yield savings accounts worth it?
Think of a high-yield savings account as an opportunity to protect your money while earning interest in the process. But while it’s safe, this savings option offers lower returns than many other investment options. It is important to carefully evaluate your situation when determining if a high-yield savings account is right for you.
Should You Open A High Yield Savings Account?
A high-yield savings account allows you to earn interest on your savings. The yield is almost always lower than what you could potentially receive from riskier investment options, such as stocks. However, high-yield savings accounts pay as much as 10 times more than traditional savings accounts, depending on the institution.
High-yield savings accounts, particularly online accounts, are also flexible in terms of transactions. You can deposit, withdraw, or transfer your money with ease, which makes them an excellent tool for stashing away extra cash for emergencies.
What Are The Alternatives?
When determining if opening a high-yield savings account is worth it, it is important to consider the alternatives. Apart from high-yield savings accounts, Certificates of Deposit are another viable option when it comes to saving your money. However, you won’t be able to access your cash for at least a year. And the longer you keep your savings in CDs, the higher the interest rates. We’re looking at an average of 0.21% a year and 0.95% per two years. Though lower than the APY offered by high yield savings accounts, it beats the 0.06% APY found on regular savings accounts.
Money market accounts are also another option worth looking into if you want higher rates. Where banks would offer 0.10% on a regular savings account, they might offer 0.25% on a money market account. Or you can skip the formal banking institutions and try peer-to-peer lending platforms that offer low minimum deposits and excellent rates. Though not FDIC-insured, the platforms spread risk across all lender investors.
Conclusion
These alternative investments may offer benefits that fit your specific situation, but overall high-yield saving accounts are a valuable place to save your money. These accounts offer much higher yields when compared to traditional saving accounts. That’s why they make a great option if you are looking to save up for a rainy day or a relatively large payment, especially since you can access the funds at any time and account set-up can be relatively simple. At Cashero, we offer a high-yield savings account that comes with an industry-leading average APY of 5%.
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