What Is A High-yield Savings Account? – A High-Yield Savings Account (HYSA) is a type of savings account that offers a higher rate of return(interest) than the standard savings account you find with a typical bank.
That is the “canned response,” but what does this mean?
Simply put, a High-Yield Savings Account (HYSA) pays you more than the usual bank savings account pays you to deposit your money into.
Are High-Yield Savings Accounts A Good Idea?
I wanted to touch on this quickly since you took the time to find this FAQ.
In the fewest words, yes. High-yield Savings Accounts are a good idea for particular money.
What Is A High-yield Savings Account Is Good For?
Money you must have access to and cannot risk losing.
What I’ve experienced with my HYSA’s:
These High-Yield Savings Accounts, HYSA, are like regular savings accounts with everyday banking but offer better returns.
This means money can be transferred back and forth between checking and savings, allowing ease of access for this money.
Also, being attached to a banking service, you will notice these accounts are FDIC-protected.
So HYSA’s can offer quick access and protection of saved money. Refer to your HYSA provider for full terms and conditions associated with your HYSA.
FYI, HYSA’s can be a great place to keep your starter emergency fund, Baby Step 1 of Financial Peace University, and an option for your entirely funded 6 Month Emergency fund, Step 3 of Financial Peace University.
Consider your financial needs and how far you are in Step 3, starting to fund or fully funded and move on to further Baby Steps of FPU.
Experiences Have You Had With High-Yield Savings Accounts?
The high-yield savings accounts I use are tied to certain banks I operate. These banks are more online, less brick-and-mortar types of banks.
I use Ally and SoFi accounts, one for my blogging system and the other for my personal banking needs. Both offer high-yield savings accounts with their checking(Update: >4% as of Oct 2023).
Both these banks offer higher interest rates for my savings accounts than other bank accounts I still have. I have had one bank account for over two decades and have yet to get a decent yield on my savings account.
What Is The Downside Of A High-Yield Savings Account?
I want to keep this brief and share my HYSA experiences.
I feel HYSA’s are great for your Baby Step #1, the first $1,000 balance, but as I look further into it, HYSA can have a significant drawback.
HYSA’s interest rates can be changed anytime and compared to other options for your fully-funded emergency fund, Baby Step #3. Some people use CD investments that lock in rates for a specific time.
So, HYSA might need to be more reliable for returns versus locked-in investments like bonds and CDs. I plan to look into these options for me. Right now, I use a cross between a HYSA and a money market account for my emergency fund(Step 1 & Step 3).
How Long Should You Keep Money In A High-Yield Savings Account?
Let’s imagine HYSA forever offering ‘good enough’ rates to keep your money in it.
Should your rates remain the same, I can imagine never pulling out my Emergency funds while working.
My Emergency fund is a 6 months of expenses emergency fund. To cover the loss of income, should I lose my job?
So till I lose my job and the HYSA rates change enough to consider other savings methods, I will keep some portion of my Emergency fund in a HYSA.
I wanted to keep this brief, and I want those who don’t know what a high-yield savings account is to learn how I feel about them.
Contact your financial advisor and see how a HYSA might solve a problem you have not noticed.
Thank you,
 Myself with an interesting Bull Sculpture. Notice: No Lambo’s. :/ | Hi I’m Tom, A Blogger And A PIG Farmer. PIG Farmer as in I grow Passive Income Generators(PIG’s). I’ve been playing with stocks, mutual funds, and options for decades, as well as always working on my side hustle stacks. Unlike what you read online, I’ve yet to find a way to get rich quickly. Get Rich Quick isn’t happening for me. My journey has been long and continues. I hope to have so many PIGs I can stop working at my current job and volunteer as a medical worker overseas. Still waiting, but getting there. I still am a family man, and while on this Journey of Growing PIGs. I wanted to share my adventures(ups and downs), hoping you will contribute with your feedback and comments. Fun Fact: In my spare time, I am a Band-Dad! |