Want to know the secret to boosting your savings? Well, you’ve come to the right place.
The magic, almighty and most effortless way to boost your balance is… wait for it… opening a high-yield savings account.
That’s it — that’s the secret hack many novice savers tend to overlook.
Why open a high-yield savings account?
The real question you should be asking yourself is, why not?
Sure, investing may reap higher rewards, but if you haven’t already built a habit of saving, then starting with investing can be a riskier choice.
A high-yield savings account is a great place to build your saving habits and work towards short- and long-term financial goals, and most importantly, it’s a safe, risk-free place to store your money in case of emergency.
While these accounts alone won’t make you a millionaire, it’s something that any financially-savvy person should have in their savings arsenal.
6 reasons to choose a high-yield savings account
1. It’s a safe place to store your savings
Your first question may be, “But is it safe?”
To put it simply, FDIC and NCUA insurance protects consumer deposits up to $250,000 in the event that a financial institution fails or is forced to shut its doors.
2. You get paid for simply storing your money in it
High-yield savings accounts are a type of deposit account that typically pays a higher interest rate than traditional savings accounts and almost always offers better returns than traditional checking accounts.
Interest is calculated based on your account balance and the account’s annual percentage yield (APY). So, essentially the higher your balance, the higher your earnings.
So what it ultimately comes down to is asking yourself this: Would you rather your money sit and earn next to nothing in a traditional savings account, or do you want your money to work for you and earn anywhere from a couple of dollars to thousands (depending on your balance and APY) by simply storing and regularly contributing to your high-yield savings balance?
3. It’s a straightforward approach that requires no advanced knowledge
Here’s how it works: You open a high-yield savings account, make an initial deposit, then set up regular contributions and voilà! Watch compound interest do its thing.
It’s that simple.
4. You can occasionally earn a bonus for opening one
As if earning money for doing nothing wasn’t enough, some banks offer a bonus as high as a couple hundred dollars for opening an account at their institution.
That’s right: They’ll pay you for opening an account and depositing your money with them.
To see what’s available, check out Bankrate’s best bank account bonuses.
5. Typically, you can keep an account at no extra cost to you
For the most part, high-yield savings accounts cost nothing extra to own. That’s not always the case, but in general, you can find a bank that doesn’t charge any fees or offers easy ways around them.
Additionally, some banks don’t even require a minimum opening deposit, meaning you can start slow and steady if you’re just getting started.
To compare banks, check out Bankrate’s reviews of the best banks.
6. You can easily access the money if needed
Unlike certificates of deposit (CD), high-yield savings accounts are 100-percent liquid, which means you can access the money anytime you need it. This could come in handy during an unexpected financial emergency, or if you need to raise cash quickly.