If you are like most people (and me one year ago) you are keeping most of your savings in a regular savings account that pays 0 to 0.07% interest rate. For most of us, this is not something that we ever think about.
These accounts are simply meant to hold our money and keep it safe. I think that is a great thing (everyone should have a savings account, and I do mean everyone). Having a savings account already show initiative and good financial literacy.
However, having a high yield savings account changes the whole game. Now you may be curious and want to know……
WHAT IS A HIGH-YIELD SAVINGS ACCOUNT?
From the Financialtwins.com
Well, I thought you’ll never ask. A high yield savings account is a federally insured account that accrues interest higher than the average savings account. The different interest rates that one can receive range, but in these times (early 2020) it should be around 1.3%.
This is compared to the national average of 0.06%. Putting your money into a high-yield account means that you are earning interest on your money and growing it without much effort. You are literally making money without having to do anything!
Now, you may ask “Well Maeva, how do I know which high yield savings account to open? “
The best choice of action is to find an account that gives you the highest interest rate with the lowest service fees. Some banks and financial institutions make you pay a monthly fee that can eat into your interest rates.
However, there are plenty who do not charge a monthly fee (these are the ones you want). While others may require you to have a minimum deposit or set up a direct deposit to waive the fees.
Also, make sure to be thorough in your search. Do not just go looking for large financial institutions because that is what you know. Often times there are small, less-known banks that have some of the highest interest rates available out there.
But if you are like me and do not want to go trudging through the second page of Google Search. I’ve made your life easier by creating a list of the banks with the highest savings interest rates here.
SAVINGS ACCOUNT TERMINOLOGY YOU SHOULD KNOW
Savings Account: This is a deposit account in which one can usually get interested.
Interest: This is what the bank would pay into the account over time.
Compound Interest: This is the interest you gain on both the initial money and on the interest, you accrue over time. This essentially means that your interest accrues interest which means more money for you.
Annual Percentage Yield: This is the amount of compound interest an account earns in a given year.