Why You Should Open A High Yield Savings Account
Have you ever found yourself transferring your savings money into your checking account? On a weekly basis because you were short on cash for the thing that you wanted to buy? Or found that all these transfers were costing you stupid fees? Welp, if you’re like me then yes, you probably have. My inability to control the temptation from spending my savings money was hurting my money goals.
That’s when I decided I needed to do something to keep from transferring my money so easily. In other words, how could I make it harder for myself to withdraw from savings? Enter the high-yield savings account (HYSA).
A HYSA is a type of deposit account, much like your checking account, that offers a better return on your money than accounts in brick and mortar banks do. High-yield savings accounts at online banks provide higher annual percentage yields (APY) or return on your money because they’re saving money on overhead costs that traditional banks have - think rent, employee salaries, and office supplies.
Like with your checking account, you should look for HYSA that are FDIC insured, meaning your money is protected up to $250,000 by the Federal Deposit Insurance Corporation (FDIC).
Why you should open a HYSA
I love my HYSA for so many reasons, including playing a major part in helping me reach my financial goals and changing my mindset about saving and spending. If you don’t already have a HYSA, you should consider opening one up today if you want to reach your money goals and like getting the most from your money.
When I had a traditional savings account with my brick and mortar bank, the 30 second transfer to my checking account was my downfall. It was too easy for me to cheat on my financial goals. With a HYSA on the other hand a transfer to your checking account could take a couple of days and this step alone is enough to make you think about using your savings money on a discretionary purchase. Therefore, impulse buys without enough money for them become harder to make.
When you need to wait for your money, you naturally become more mindful about where that money will go and that was true for me. I now live a cash buffer in my checking account and only withdraw money from my HYSA for their intended purpose.
Okay but the real kicker is the fact that brick and mortar banks pay close to nothing, 0.01% APY, on the money you hold in these account. Whereas HYSA provide upwards of 1.5% (as of 4/23) APY.
This means that $1,000 saved in a brick and mortar bank over the course of 12 months would yield a measly $.10 cents. A HYSA at 1.5% on the other hand, would earn $15 after 12 months.
So tell me, what would you do? Most definitely not put your money in an account earning less than 1%. Exactly, HYSA are the clear winner here, they 1) provide more for your money and 2) make it harder for you to cheat on your goals.
Stop putting your money in accounts that aren't giving you much in return and make it easy for you to cheat on your goals.
How to open a HYSA
I use Ally Bank for my HYSA, but there are so many option available that I would recommend you do your due diligence and find what bank is best for you. NerdWallet does an amazing job at reviewing HYSA with pros and cons list to help you come to your decision.
Google “Nerdwallet best high-yield savings account” and you’ll find a list of their most recent articles
Review their list of the best
Click into the ones that stand out for a more thorough review
Select a bank and make sure it’s FDIC insured
Be ready to enter all your personal information
It take less than five minutes to open an account and will save you in the long run. Go open your account today!