You need a High Yield Savings Account...

saving Nov 15, 2021

 


 

Are you saving for a house or large purchase in the near future? 

 

Do you have your emergency fund sitting in a traditional savings account?

 

Yes? Well, I've got good news for you. There's a better place to keep that money - a place that acts just like a traditional savings account but pays ~10X the interest.

 

This place is a High Yield Saving account. 

 


 

So, what is a High Yield Savings Account (HYSA)? 

 

HYSAs, like traditional savings accounts, are a type of deposit account that can be found at both online and brick-and-mortar institutions. BUT, HYSAs are different in the sense that they pay much higher interest rates than your traditional savings account - which therefore provides a higher return on your money.

It is in your best interest to keep your savings accessible, especially an emergency fund, for example. But interest rates today in traditional savings accounts are close to nothing (the average is just 0.06% as of this writing) and inflation is stealing from our savings right in front of our eyes - I hate that! Think about it... $300 spent at the grocery store today is buying you far less than $300 spent at the grocery store 5 years ago. 

Insert a HYSA - a really solid way to keep your money accessible - but working harder to hedge against inflation. Now, the interest rates of an HYSA will not outpace inflation entirely, but they are definitely a better place to stash cash. 

 

Key Benefits of High Yield Savings Account-

  1. Higher Interest Rates than a traditional savings account
  2. Easily accessible
  3. A positive mental barrier for your savings :)
    • Do you find yourself dipping into your savings to cover careless overspending? This used to be me. My savings in its entirety was kept in the same institution as the checking account from which I paid monthly expenses, etc. When I opened my Commerce Bank app, I could transfer money from savings to checking without really even thinking. Credit card bill a little high this month - oops, I'll just transfer some money from savings- yep, that was me! When there is a low barrier to entry, it is so easy for us to let our money habits get out of alignment. When the bulk of your savings or cash on hand is set aside in a HYSA - it's slightly less convenient to "dip into to" forcing you to think twice before doing so. 

 

What $$$ do I keep in a HYSA? 

The short answer - Savings that must be accessible but is not in immediate need is best kept in a HYSA.

  • Emergency fund or Cash Cushion as I like to call it
  • Any short term savings (money you are saving and will need in the next 3-5 years)
    • Savings for a wedding
    • Savings for a new car
    • Savings for a down payment on a house 

So, what stays in my traditional savings?

  • Any savings you have and plan to use within the next few months
  • and/OR 1-month expenses 

For example, today is November 15th and I have money saved for Christmas presents for my family. This is best housed in my traditional savings account as I will start spending this money and buying gifts any day now. 

 

What is the BEST HYSA account?

 It is important to do your own research and decide what HYSA is right for YOU and your specific needs. Here are the things you should look for before choosing your HYSA... 

  • FDIC insured - this is very important. It ensures your money is federally protected against bank failure and theft. Most HYSA are online institutions - which is no big deal - as long as they are FDIC insured.
    • Fun fact - you use Venmo? It is not FDIC insured! Meaning, if you keep a balance sitting in Venmo and wake up to the money completely gone... there is nothing you can do about it. 
  • Good App/Web User Experience - again most HYSA are online institutions, meaning they don't have a local bank branch down the street that you can visit. I think it is important that your HYSA has a user-friendly app and website. 
    • On this note - when choosing your HYSA it is also important to understand what withdrawals look like. Have an emergency and need to quickly pull out $10K from your HYSA? MAKE SURE YOU UNDERSTAND how you will go about this. A wire transfer is a very common method for quickly transferring money to another account such as your checking. Oftentimes, accounts have a daily transfer limit within their apps or online - so it is important to understand the process of withdrawing a large sum quickly if ever needed. 
  • Solid Customer Service - This is key - when you're dealing with your money - you don't want crap customer service. Is customer service available 24/7? Read reviews. 
  • APY - what is the annual percentage yield? The higher, obviously the better! On this note - Most HYSA have variable interest rates just like your traditional savings account. 
  • Fees & Account Minimums - Do they charge monthly fees? High transaction fees? Is there a minimum to open the account? 

 

Recommended High Yield Savings Accounts & Which one I use... 

Recommended HYSAs (my research here considering all of the above items) - 

  1. Ally Bank
  2. Marcus by Goldman Sachs
  3. Alliant

*Click each of these to see more in-depth research and information*

 

My HYSA and the caveats with it - it isn't on my recommended list because of the caveats - which I am okay with you might be too!

I use T-Mobile Money - a HYSA for both T-Mobile customers and non-customers. 

 Pros

  • Super competitive APY - I haven't found one higher. 
    • Everyone gets 1% APY on all money within the account
    • T-Mobile Customers get 4% APY* on the first $3K in the account and then 1% APY on the balance 
  • Easy to use App 
  • Debit card and checks provided (don't lose these!)
  • FDIC insured

Cons & Caveats

  • No joint accounts (I have to keep the account in my name only and cannot add my husband to it - we are okay with this - but you may not be). 
  • No wire transfers - this is a big caveat. I am personally okay with it in exchange for the high APY, but you may not be. This makes it a little more challenging to access a large sum of money at a moment's notice. To do so, you have to use the checks they send you OR ensure you have enough time to extract the money through daily transfers which are a $3K limit per day. So - if I needed to get $9K out -  I would either need to write a check out of the account or allow myself 3 days time to transfer the money through the app or online. 
  • *If you are a T-Mobile customer and therefore you qualify for the 4% APY on the first $3K in your account- you have to make 10 purchases out to the account monthly to get this APY. This is a game you have to play to win essentially, which I am again cool with and what I do is make sure I use my T-Mobile money card for 10 small purchases each month (think 10 $1 transactions for my McDonald's coke) and then I simply replenish the funds at the end of each month and start over. 

 

& that's a wrap! If you don't yet have a HYSA - I hope this post brought you the information you need to feel confident opening one!

If you're opening one and rolling into 2022 with your money working harder- holla @ me on IG!! Yeah!

CHEERS to getting smarter about our everyday finances! One step at a time. 

xoxo Mallory

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