Picture Credit: https://www.cbsnews.com/news/savings-accounts-that-earn-11-times-national-average-or-more/
I don't know if you've checked lately, but high heels savings accounts yield some of the highest rates we've seen in years. We're talking anywhere from 4% to 5% in growth. That's insane.
There is a correlation between inflation and the yields these types of accounts can provide during these times, but the question is: should we be taking advantage of these yields?
This is an article I've been sitting on for a while. A couple of my clients and friends have asked about these, especially with the popularity of these accounts rising lately. The answer is never a one-size-fits-all situation, but this article will discuss the pros and cons of using these accounts.
Pros
The Yields, Duke. The Yields
With the 4-5% yields, This is a great place to park dormant money, such as excess savings or money you won't touch for a while. We've all learned how powerful compound interest is, and the longer your money is inside an account like this, the more growth could happen.
Make Your Money Work For You
High Yield Savings Accounts put your money to work for you. If you're to have an extra $2,000 sitting in a savings account earning 0%, that money isn't doing anything for you. Putting it in a higher-yield account allows it to be there still when you need it but also have more of what you need when you need it.
Cons
Opening another relationship with the financial institution.
This may be one of the most significant downsides. If you're not familiar with the financial institution, opening an account may not be beneficial. The reason is that opening a relationship with a financial institution could invite solicitation for more of your hard-earned money through investments or other types of credit cards or other accounts. Do your research so you don't have a financial advisor or a banker persistently hitting you up for business. We never want that.
Difficulty getting money when needed
If you were in an emergency, you want immediate access to your funds. If you have a high-yield savings account, you may need to know how long it may take to access your funds. That could spell trouble.
A way to mitigate that is to have access to a tray line that you can use for those emergencies and immediately pay that trade line with the money you have already provided with the savings account.
Of course, all of the old rules apply. Have your 3 to 6 months of savings ready for a rainy day. You don't want to be in a situation where you have to use a credit card for an emergency and then have to pay back exorbitant amounts of interest.
Unsteady Yields
We don't know how long this will last. There are times when we'll get yields like this with these high-yield saving accounts, and there are times when the maximum that we will get is only 2%. While it's here, it would be good to take advantage of it but realize that the benefits may only last for a while.
Verdict
I'm saying, why not? These accounts can be a great place to park dormant money and still have it at work for you instead of sitting inside a 0% yield savings account. Just make sure to do your research and that you still have access to your money and that it's enough to cover any emergency expenses. And I'm not here to sell you on this, but again, we don't know how long these accounts will be around. When the yields go away, there's no downside in consolidating your accounts, So do your research and take advantage of what best suits you!
DISCLAIMER - NOT FINANCIAL ADVICE The information is not intended as, and shall not be construed or understood, as financial advice or a recommendation but rather as financial education. I'm not a financial advisor, nor do I portray myself to be. I have done my best to ensure any information provided is accurate and provides valuable educational information. The information I provide is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your particular situation. Please continue to do your own research and make the best decisions for your situation.
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