A high yield savings account is exactly what it sounds like: a savings account with an above average APR. Saving money is important, as I’ve stressed in past posts. So why not make extra off the dollars you already have saved away? Here are a few of the many reasons you should have a high yield account.
Saving Up for a Vacation or Special Event
Want to go on a nice vacation? Save up for it with a high yield savings account that is separate from your bank account. This will allow you to save up for your vacation without giving you instant access to your cash. You can either put away specific installments of how much you’d need for your dream trip or save up far in advance until the day you decide exactly where you want to voyage to.
Having one of these accounts is also ideal if you have a purchase you really want to make that will cost you a chunk of change – typically things like a television, laptop, or new gadget you’ve really wanted. Saving ahead in a high yield savings account can give you the access you need to liquid cash for one of these purchases. You could even attach a PayPal account to it. You can make it one of your goals to afford your dream purchase. Just always remember to shop smart and be responsible with your savings because you never know when you might need it.
Saving for emergencies is essential for any financial plan. You should have at least three to six months of liquid savings set aside to live financially free. High yield accounts are great for this because the account is liquid enough for you to access your cash but kept safely out of reach until absolutely necessary. You don’t want to reach into your emergency fund for purchases, it’s only there for emergencies or hard times. If you would like to know more about the importance of emergency funds, check out this article here!
Save Up for Some Big Purchases
I’ve mentioned a few pricier purchases you may be considering. You could still use a high yield savings account to save for even larger purchases like a dream car or future home. This higher interest return will get you closer to your purchases than your traditional accounts and you will not have to worry about market volatility. This is good if you don’t want your principal amount to decrease because you might be making a large purchase sooner rather than later. You should always have a portion of the amount you need to make your purchase in a savings account, so why not have your cash in a higher yielding account to accumulate more money in interest?
High yield savings accounts are a great replacement for your traditional savings account. I personally use the Marcus account by Goldman Sachs for a 1.5% yearly return – which isn’t a lot, but it is a safe place to store my emergency fund. I’m not suggesting that this account should take place of a retirement fund, I just believe you can get better returns in the market and in many other places as well. High yield savings accounts are perfect for keeping cash liquid and earning a little bit more interest without having to worry about that amount going down at any point since it is FDIC insured. if you would like to know more about saving check out The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreams by Hamm Trent
Check out more content this Tuesday!