How Moving Your Money to a High-Yield Savings Account Will Help it Grow
Let’s talk about your savings.
Have you got some money stashed away for a rainy day? If you’re like me, you may be sitting on some spare dollars you were gifted throughout the years. Maybe it’s acting as your Emergency Fund or maybe it’s just another account that came with your checking account.
Do you know what the APY (annual percentage yield) on that savings account looks like? If you’re using your big bank’s savings account (like Wells Fargo, Bank of America, etc.), you’re likely seeing a percentage around .09. That’s not exactly providing you with some extra fun money.
Which is totally fine. But what if I told you that you could get a lot more bang for your bucks with a high-yield savings account? On average these accounts pay you just under 2 percent interest on your money each year.
After all, shouldn’t our money do some of the work for us?
What exactly is a high yield savings account?
I’m glad you asked. A high yield savings account is offered by an online FDIC-insured bank and provides users with an above-average APY with lesser or (in some cases) no fees or minimums to apply. The accounts are federally insured up to $250,000.00 (with some accounts insured up to $1 million). To date, these accounts are yielding just under 2 percent for customers each year.
How is this possible?
Well, these accounts are offered by online banking institutions that don’t have physical branches, thus freeing them up to offer more advantageous deals without addressing their overhead costs.
What are your options?
There are a surprising number of online high-yield savings accounts available to U.S. consumers today. See the list below for our top recs.
As you explore the option that’s best for you, be sure you explore monthly fees. While traditionally lower than big banks, online banks that offer these savings accounts might still include monthly service charges and fees.
You’ll also want to watch out for the minimum balance associated with these accounts. Our list includes those without minimum balances. Though, you’ll notice some of the highest APYs do have minimum balances.
When you earn more than $10 from an interest-bearing account throughout the year, you’ll receive a Form 1099-INT from your bank to include with your tax return. This should arrive before January 31st so keep an eye out.
For most, the amount of interest income you’ll earn from this savings account won’t increase your tax liability. So, don’t sweat the small stuff and start optimizing your annual earnings with a higher APY savings account.
For more on these tax implications, check out this handy article from Business Insider.
Those we recommend…
So, have I convinced you to start exploring your options?Brilliant. Here are two of the top-rated 2020 lists from NerdWallet and Business Insider.
NerdWallet’s Best High-Yield Online Savings Accounts of January 2020