This Set-It-and-Forget-It Move Can Help Boost Your Savings
When it comes to building long-term wealth, saving and investing go hand in hand. While it’s crucial to allocate some of your funds into investments that have the potential for high returns, it’s equally important to have cash readily available for emergencies and short-term needs.
However, instead of letting your cash sit idle in a traditional savings account with low interest rates, consider opening a high-yield savings account (HYSA). This type of account allows your money to grow while still being easily accessible.
Understanding a High-Yield Lazy Account
HYSAs offer higher annual percentage yields (APYs) compared to traditional savings accounts, with many currently offering around 4% APY. These accounts are protected up to $250,000 per depositor and per bank for each ownership category, provided the bank or credit union is insured by the FDIC or NCUA. They typically come with minimal fees and are easy to maintain, earning them the nickname “lazy” accounts.
You can easily set up a HYSA with automatic transfers from your checking account, making it a hassle-free way to earn extra yield on your savings.
Advantages of a High-Yield Savings Account
HYSAs do not pose additional risks compared to traditional savings accounts, making them a smart choice for storing your money and earning a higher APY.
For example, if you were to store $10,000 in a traditional savings account offering 0.38% APY versus a HYSA offering 4%, you would earn $38 in the former and $400 in the latter over the course of a year.
While HYSAs may not be offered by all banks, they are more commonly found with online banks that do not have physical branches. Consider exploring Money’s list of the best high-yield savings accounts for options with strong yields, low fees, and reasonable minimum balances.
Setting Up Your High-Yield Savings Account
When choosing a HYSA, prioritize accounts with no monthly fees, competitive APYs, FDIC or NCUA insurance, and no restrictive balance requirements. Once you’ve opened an account, link it to your checking account for seamless automatic transfers.
While a high-yield savings account is a valuable tool, it should not replace long-term investing in assets like stocks. Additionally, keep in mind that HYSAs have variable interest rates, meaning the posted APYs can change at any time based on factors like Federal Reserve rate adjustments.
