Boost Your Savings: The Possible Benefits of a High Yield Account

Interest, the cost of borrowing money. Often when we think of the word interest, we immediately jump to the interest we owe on mortgages, student loans, and other debt or the interest we earn on Bonds or CDs not the meager tenth of a percent we can earn in a regular checking account. But what if there was a way to earn a little bit more interest on our cash reserves?

High Yield Savings accounts can provide more interest than a traditional savings account without significantly reducing the access you have to your money. We will dive into how these accounts work and why they pay a greater interest rate than traditional checking accounts in today’s coffee and cash video.

Hi, my name is Ben Simmons, an associate Advisor here at Simmons Capital Group. As we get into it, first let’s define what we are talking about. High Yield savings accounts are simply savings accounts that pay a higher interest rate due to various cost saving methods the overhead companies employ such as being specifically online based banks.

These banks are able to save on costs since they often do not have traditional brick and mortar locations, this means they don’t have to pay all the associated costs with owning a building. Instead, they do their business through online accounts andapplications. Rather than dropping off a check at the local branch office you simply create an electronic transfer link between your regular checking account and the high yield savings account. Once this is done you can easily transfer money between the accounts and begin earning more interest on some of that cash that you don’t want to invest.

So why would you need a high yield savings account? Well, it is recommended that households keep 3-6 months of living expenses in cash as an emergency fund. Manyadvisors recommend that this is kept separate from a traditional checking account to help delineate it specifically for emergencies. This makes High Yield savings accounts a great place to put an emergency fund. The money can generally be transferred between accounts in 2-3 business days and it will earn more than it normally would in a checking account.

Alright, so High Yield savings accounts sound pretty great; and they are, but before we get carried away let’s discuss some of the important things to look out for when you are choosing a high yield savings account.

Obviously one of the most exciting things we are looking for is the interest rate that the account will pay. While this is indeed important, there are still some other factors we want to be sure to consider. First, be sure to check to see if there are initial deposit requirements and minimum balance requirements. It won’t help to earn more interest if it all ends up getting paid right back out in the form of fees.

Second, it is always super important to check and make sure the account is FDICinsured up to $250,000, this means that the funds are backed by the full faith and credit of the U.S. government.

Finally, you will want to check to see how long the average transfer takes at the bank that you are choosing. Once you have chosen a high yield savings account and moved your emergency fund into it, remember that this is not the solution to every problem. The interest rates on these accounts can go up and down as often as daily so you’re not locking your rate in for any specified amount of time. They are primarily best used as a place to keep some extra cash on hand while earning a little more than your traditional checking account.

That’s all for today, if you have any questions feel free to reach out to us here at Simmons Capital Group and we would be happy to set some time aside for discussion. Until next time, have a great day!