Right now is a great time to put your money into a high yield savings account. That’s because interest rates are particularly high right now. However, some people say that high yield savings accounts are doomed. Therefore, you’ll want to act now, just in case.
What Is a High Yield Savings Account?
How much interest do you earn on the money you have in savings? If you have it in a regular savings account then sadly it’s probably not very much. In fact, it’s probably something like .1 percent.
A high yield savings account is the same as any other savings account except that you get more interest. Any savings account that offers 1% APY or higher is a high yield savings account. Why would you earn .1% when you could earn 1% on the same amount of money?
How Much Can I Earn From a High Yield Savings Account?
Right now there are several legitimate online banks that offer 2% or higher on their high yield savings accounts. Ally and Wealthfront are just two examples of banks that you should take a look at if you’re interested in this high interest option for your savings.
If you put just $1000 into a savings account, then in one year you would earn:
- $1 if you use a regular savings account that offers .1 %
- $10 if you use an account that offers 1%
- $20+ per year if you use a high yield savings account that exceeds 2% APY
Obviously, the more money that you put into your savings account, the more you’re going to earn in interest. More importantly, the sooner that you transfer your money into such an account, the sooner you’ll start making more.
Are High Yield Savings Accounts Doomed?
Savings rates are often influenced by the federal funds rate established by the Federal Reserve. Therefore, if the Federal Reserve raises its rates, high yield savings account rates tend to go up even higher. Unfortunately, the reverse is also true. CNBC reports that the Federal Reserve is lowering its rates and is likely to continue doing so for the foreseeable future. As a result, high yield savings account rates are declining.
I’ve seen a small drop in the interest rates on my own high yield savings account recently. I chose to open my account through Wealthfront because they have one of the highest interest rates. Earlier this year it peaked at 2.57%. However, it’s currently at 2.32%. So, it’s just a small drop, but it’s a decline as predicted. Therefore, there’s some chance that rates will continue to decline.
High Yield Savings Accounts Are Still Worth It, The Sooner The Better
2.32% is still a very good interest rate on a savings account. It’s certainly far higher than your regular bank likely offers on basic savings. Of course, you can always invest in CDs and other long-term savings accounts that offer high interest rates. However, those accounts have a variety of restrictions. You may have to meet a certain minimum to open the account. Alternatively, you may have to keep the money in the account for a long period of time or face a penalty fine for early withdrawal. Therefore, if you have savings that you want access to but want to earn a good rate of interest on in the meantime then a high yield savings account continues to be a top choice.
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