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Money. It can be so easy to spend and not so easy to save. Saving money takes deliberate action and some smarts. So if you’re able to pay your bills, experts recommend you allocate a set amount off the top each month to put in savings. The more diligent you are about this, the better.
But don’t choose just any old place to put your money. Here’s where the smarts come in. A high yield savings account can be your money’s best friend, and here are five reasons why.
1. Earn decent interest (high APY)
Checking accounts are great for paying bills, but if you have some extra money you don’t need today, why not earn a decent interest rate? A high yield savings account will help your savings grow much more quickly. For example, say you deposit $10,000 in a checking account earning .07% APY, which is standard. After one year, you’d have an extra $7. Kind of disappointing! But say you open a high yield savings account at 5% APY. Then you’d have an extra $500 after one year. Nice!
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2. Get FDIC protection
As you may know, when you invest in the stock market you are taking a risk. Sometimes this pays off in big dividends. If so, good for you! But sometimes it doesn’t. Insert sad face. You could lose your entire investment. With a high yield savings account, your money is protected by the U.S. government up to $250,000 per depositor, per FDIC-insured bank. That means no matter what happens to your bank — yes, some fail — you won’t lose your investment. Now doesn’t that feel good?
3. Pay minimal fees, if any
Fees paid to brokers and brick-and-mortar banks can add up. Typically, online banks charge few if any fees for holding your money in a high yield savings account. And you likely won’t be charged if you decide to let your money sit there awhile, quietly waiting and growing until you need it.
4. Access emergency funds easily
Stuff happens. A car accident. A hospitalization. A fire. Sometimes unplanned expenses slap us when we’re down. If you’ve put your money in a CD, you can’t access it until the term is over, which could mean waiting one to five years! And if all of your savings are in the stock market, you might have to sell at a loss in order to retrieve money for an emergency. However, with a high yield savings account you can rest assured that your money is there whenever you need it.
5. Save for short-term needs
Would you like to save for a down payment on a car, home or boat? Or is your teenager eyeing college in a couple of years? Then a high yield savings account could be your best friend. You don’t have to worry about stock market volatility eating up your savings.
Ready to open a high yield savings account? Your current bank might not offer the best option. Check out this list of high yield savings accounts to consider, provided by Bankrate. Then you’ll be on your way to a better financial future.
Here are some of the best high yield savings accounts.
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