High Yield Savings Account

Previously I wrote about passive income in my last post "Passive Income 2021". I covered three different types of ideas to start you on building a stream of passive income.

One Helpful Hint: Vocal is #3 in that post and this one as well.

A majority of adults have a bank account. That is great news for people who are money-minded and want to grow in finance. However, over a quarter of people that own a bank account are not using it properly. A savings account is intended to save money. Yet, we live a life of paycheck to paycheck in a cycle downwards. We can not continue to think like this. Financial action without a plan has robbed many of us of a future that they've dreamed of. We have to hone in on some root problems to address this equation.

There are many factors, such as skills, debt, budgeting, and circumstances that are out of control and in some cases just out of our control. This time, I want to focus on saving your income. One of the best ways to save your income is to put your money aside in a High Yield Savings Account.

What is a High Yield Savings Account?

High Yield Savings Accounts are saving accounts that pay an interest higher than the standard rate. They are beneficial beds for your cash to be reserved on growth. Picture your $100 in savings sleeping in its bed and one year later growing by 0.60%. That would give you $100.60 in your savings account. Now, 0.60% isn't much to you, but your standard brick-and-mortar-bank is paying less than that a year. The Annual Percentage Yield of a brick-and-mortar bank is 0.04%. That means if you were to save the same $100 in a regular savings account, it would be $100.04 at the end of the year.

The APY Formula

You can calculate the APY of your bank account by getting the interest rate in the following formula to see what your current money can do at this time.

APY= (1 + r/n )n – 1

By using this formula, where “r” is the stated annual interest rate and “n” is the number of compounding periods each year. You can find the APY(Annual Percentage Yield), also known as EAR(Effective Annual Rate). play around with this formula to see what your money can do while it rests. You can also play with the previous formula for the rule of 72 from my previous post, "Passive Income 2021". Use both formulas as a tool for planning out your economical success program.

Add, Don't Subtract

High Yield Saving Accounts are attractive with a variety of plans to choose from. This does not mean that you should ditch your physical branch. Most High Yield Savings Accounts can be accessed only by digital access via the internet or mobile app. You want to keep your physical branch just in case you need some help with problems and services that an online account would otherwise not have access to. Services that a physical bank has to take advantage of over an online-only account are as followed.

• Access to a Safety Deposit Box
• Dealing with Identity Theft
• Cashing out on physical coins
• Need access to a Notary
• Getting a medallion signature guarantee verification
• You want to exchange foreign currency

Think about starting High Yield Savings Account if you haven't already. Do not ditch your physical banking location for a higher yield.

Why Should I Start?

You're probably thinking to yourself, why should I try to save in a High Yield Savings Account? If the interest rate is so low, does it even matter? In my opinion, yes it matters. Even if the growth is as minuscule as 0.60% as the example provided above, you are to saving more than the physical branches. You want to save at the bare minimum of months worth of expenses. At the maximum of 12-months worth of expenses. 3 months of expenses is a good start, 6 months is great as well, 12 months or more is exceptionally well. The idea of saving based on expenses is just one fundamental to the idea of having an emergency fund.

What is an Emergency Fund?

An emergency fund is a personal finance contingency for unforeseen situations. It is meant to be untouched until an unforeseen event happens such as job loss, medical expenses, home repairs, or moving expenses hit when you least expect it. There are many more reasons to build an emergency fund, but these four reasons are usually the main reasons people build an emergency fund. The usual rule for an emergency fund is to save 3-6 months' worth of expenses. To start your process of saving for an emergency fund should start by saving $1000. Once you have $1000 continue building by making a budget for yourself that supports saving as a priority. With consistency, you will eventually build your savings to a respectable amount and look to other financial endeavors to pursue on your journey.

Where Do I Start?

You want to find any bank that is FDIC insured. If the bank fails, then the money you are holding in that bank is secured at a coverage limit of $250,000 as long as it is FDIC insured. Most banks are FDIC insured, but if you want to be sure, you can call the FDIC phone number at 1-877-275-3342 or check the BankFind tool. Also, look for the FDIC logo for any bank on their website or their physical establishment.

Start searching for interest rates above the standard. Compare them with other high yields as well as additional programs provided that would be a match for you. Look at any bank that does not charge a fee for using their services. You don't want to pay additional for a bed for your money to take a break with. Look for banks with good reviews. Great service and great customer support, such as automatic transfers or no minimum deposit.

3 Banks with High Yields

The following 3 Banks that are listed are High Yield Savings Accounts that can start you on your savings journey.

#1 Marcus by Goldman Sachs

Marcus by Goldman Sachs has a $0 minimum to open with an APY of 0.50% and no monthly fees. It allows same-day transfers of up to $100,000 or less to and from other banks. Their bank has a contact center that is open 7 days a week that is based in the United States. They also have 4.5 out of 5 stars ratings based on scores made on Nerd Wallet. One negative factor from its highlights is its lack of having a checking account.

#2 Varo

Varo has an APY of 0.40% and no monthly fees. However, the rate can change if you meet the following requirements. $10,000 saved with Varo, five qualifying debit card purchases, and have a direct deposit minimum of $1000 each month. If all requirements are met your rate will change to an APY of 2.80% as of its current policy. It allows you to automate your savings account as well. It currently has a 5 out of 5-star rating scored on Nerd Wallet. The negative factor for Varo is that it requires a minimum balance of $0.01 as compared to Marcus by Goldman Sachs.

#3 Ally

Ally has a $0 minimum to open with an APY of 0.50% and no monthly fees. It allows automated transfers into the account that you can schedule. The bank portion of ally has a 24/7 service to assist you with your questions and issues. Ally has loan services and investing services currently at $0 commission. They have 4.5 out of 5 stars ratings based on scores made on Nerd Wallet. One negative factor from its highlights is that it has an overdraft fee of $25 on excessive purchasing. It also was not on Nerd Wallets 7 Best High Yield Savings Account as of March 2021.

There are many more options for High Yield Savings Accounts, but the 3 mentioned banks provided are meant to be a good start for anyone to look into the info.

Conclusion

These are the choices you have starting your high yield savings account. There are way more than the banks mentioned above. It takes time to build a savings account that will feel secure during downtime. At best you would have to put in a large sum of money for a quick head start on earning the interest rate you want while you save. At the bare minimum, you would have to dollar cost average each month to start building an emergency fund that can keep you afloat during downtime. It will take time, but with consistency, you will see the results you desire.

Disclaimer

I am a finance enthusiast. Not to be confused with a finance professional. I love everything about finance, but I could not in good conscience give you information claiming it to be an expert's opinion. I highly recommend doing your research and talking to a professional to get the best results for your journey.

I hope this was helpful.