Should I Get A High Yield Savings Account?
As a potential saver and investor, you would have undoubtedly heard about a high yield savings account. This type of account brings generous returns and is safe at the same time. However, before investing you should have all the information at your fingertips. Here you will learn exactly what a high yield savings account is, the advantages and disadvantages.
We will teach you the best uses for this account and prep you for your interview with your bank or financial institution. Without further ado, let’s get into it.
What Is A High Yield Savings Account?
A high yield savings account is an account that often pays 20-25 times what a normal savings account would pay. One of the advantages of this account is that electronic transfers between accounts are easy. This makes it effortless to save!
What Should I Look For When Choosing A High Yield Savings Account?
There are several factors to take into consideration when you are choosing a high yield savings account. We have put together a question and answer segment that you can use to get all the information you need to make an informed decision when you go into your bank or financial institution.
What Is The Interest Rate?
You will be given a percentage answer that you can compare with what other financial institutions are offering. It is always a good idea to find out who is offering the best rates.
Is This Rate Standard Or Promotional?
This is an important question if the rate you are given is standard, which means that you are pretty much guaranteed returns based on that rate. However, if the rate is promotional it will only be for a short time. Sometimes, a few months. There may also be a minimum or maximum balance to access this promotional rate.
How Much Money Do I Need To Start A High Yield Savings Account?
This is the stipulated amount of the initial deposit. Most likely there will be a minimum requirement i.e. the least amount of money you need to open the account.
Are There Any Fees That I May Have To Pay?
Of course, there are always fees for the maintenance of an account. However, there are fees that you can be avoided. Some yield savings accounts allow you a certain amount of withdrawals without incurring additional charges. You can avoid any fees by staying within your limit.
How Can I Access My Money?
If you need access to your money, this is an important question. In addition to being able to make withdrawals at the counter, your high yield savings account may come with an ATM card.
Can I Link My Account To A Bank Account At Another Bank Or A Brokerage Account?
Some high yield accounts allow this facility for your convenience. If this type of transaction is allowed, moving your money to your high yield savings account becomes easier and you may be able to save more.
What Are My Deposit Options?
It is helpful to know what options are available to you for deposits. Your options are usually via the ATM, cheques or some banks and financial institutions offer smartphone apps that allow you to do mobile cheque deposits.
How Is The Interest Compounded?
Your interest can be either compounded annually, bi-annually, monthly, weekly and daily. Compounding at a daily rate yields the most interest in theory.
What Can I Use My High Yield Savings Account For?
You can use your high yield savings account to customize your savings to suit your current needs. Here are some common usages for high yield savings accounts:
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You can use a high yield savings account to save for a home, car, or an expensive appliance.
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Your high yield savings account can be the account that you can use for aggressive savings. This amount should be able to cover your expenses comfortably for about 3-6 months. If you are unemployed or you are waiting for your retirement benefits to kick in, you will be able to live comfortably in the interim.
If you have extra money, the best place to put it is in a high-yield savings account. Some avid savers move the excess from their checking accounts into their high yield savings accounts. Checking accounts offer little interest, so it is a great place to move your money to.
What Are The Advantages Of A High Yield Savings Account?
High yield savings accounts are rich in benefits. Here are the ones that stand out:
High yield savings accounts offer higher annual percentage yields than other savings accounts.
There are usually no monthly fees with high yield savings accounts.
They also come with low minimum balance requirements.
High yield savings accounts allow easy transfer between your existing accounts.
You can expect your investment to be quite safe since it is insured.
Many high yield savings accounts allow you to manage your money via mobile applications.
Are There Any Disadvantages That I Should Be Aware Of?
You should be aware that there is often a time lag when transferring funds between your accounts. It may take between 24 hours to 48 hours for your transfer to hit your other account.
Can I Lose Money With A High Yield Savings Account?
Your money is quite safe in a high-yield savings account. Your principal investment is insured and also protected by law.
However, you may be able to make more money with a riskier investment like high yield bonds, venture capital, and options.
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Now is good a time to get serious about saving as any. If you have financial goals, investing your money in an account that can earn you substantial interest is the way to go. It will bring you closer to what you want to achieve. Money for an emergency, education, or for a home is all within your reach with the right investment.