High Yield Savings
What it is, and why it WILL benefit you
There’s not a lot that I’m dogmatic about, when it comes to personal finances. My motto is basically “you do you” (as long as you’re clear-eyed and intentional about your decisions, which is where I come in!).
But honestly, I’ve never met anyone who couldn’t benefit from a high-yield, online savings account.
Higher Interest Rates (aka Free Money)
Have you ever noticed that your normal savings account only gets you around .01% interest? That’s literally pennies of earnings...if you have $10,000 in your savings account, by the end of the year you’ll earn a whopping…$1 in interest. You may also be paying a monthly fee to even have the account in the first place. You’re really not winning here.
With online high-yield accounts, it’s a different story. They don’t operate brick-and-mortar bank branches, so they don’t have any of the expenses that come with traditional offline banking.
Online banks in turn pass these savings onto you, through higher interest rates. They offer interest rates that are around 100x higher than what you’ll get at a traditional bank. Remember how your $10k only got you $1 of interest at Chase?? With a high-yield online bank with 1% interest, it’ll get you $100. That is truly free money that nobody should pass up on.
People often ask me what the catch is. But honestly, there is none. It’s just a better business model that passes some of the benefit onto the consumer. Why not put your dollars with a bank that’ll work for you and share some of the love?
It’s Separate From Your Normal Account…
Which Will Stop You From Withdrawing in a Non-Emergency
Aside from the whole free-money-thing, my favorite thing about an online savings account is that it’s totally separate from your regular bank.
When you’re saving for a long term goal (like an emergency fund, a down payment, or a big trip), you don't want to see those amounts reflected every time you open your bank account app. Those BIG savings numbers have no real bearing on how much money you have to spend this week or this month. Those are long-term goals, and you don’t want to confuse your short-term cash flow (i.e. what’s in your checking account) with your long-term goals. That just makes it way too easy and tempting to take money from your long-term savings, every time you overspend or just HAVE to buy something.
Save yourself the trouble, and just keep it separate...out of sight, out of mind, right?
They (Might) Force You to Automate Your Savings
Some banks give you a higher interest rate if you automate a savings transfer every month. I love this because it takes the human-factor out of the equation. You want to set yourself up for success, and automating your savings does just that. Send money right to savings, and you won’t give yourself the option to think “ I’ll just keep the cash, I don’t think I can afford to save this month.”
Banks I Recommend
One big thing you should know: interest rates at these online banks go up and down with the economy (more specifically, with the Federal Reserve’s rates, but the details aren’t super important right here). This really can’t be helped, so just remember that you’re still winning when compared to your regular savings account.
Here are a few banks you can check out:
Chime - They’re currently offering 1.0% Interest
CIT Bank - They’re currently offering 0.49% Interest
Ally Bank - They’re currently offering 0.6% interest
I’d love to hear which high yield savings account you decide to go with! Once you open your account and are ready to start saving, book a free Intro Session with Beyond Money, and let’s get the balance moving! Our average client saves $8K within three months, and it’s hard to say no to that.
XO
Kate
Beyond Money is not affiliated with any financial institutions, doesn’t sell insurance or offer investment management services. All advice given is based on personal and professional experience and entirely our own.