Is your bank stealing from you? Let’s learn how you can protect and grow your money with a high yield savings account.
Most savings accounts stink. Big banks make healthy returns on your savings by loaning or investing your money and giving you peanuts in return. Luckily for us regular joes there is an increasing number of alternatives popping up across the marketplace that offer bigger returns for you and I and a smaller slice of the pie for the bank. Let’s dive in!
First, what’s the difference between my current savings account and a high yield savings account? (We’ll call it a HYSA for now on to keep things brief)
The primary difference is in the name itself, a higher yield. Yield is the return you receive on your savings. If you park $10,000 in a regular savings account at Chase for example (at the time of writing) you’d only get $1 in return.
That’s robbery! At the current rate of inflation you’re actually losing money by leaving your money with Chase.
Chase takes that $10,000, buys US Treasuries with it that yield anywhere from 4-5.5% making them $400-550 over the same year and only give you a single dollar in return.
While you can buy those same treasuries yourself to earn that better return, most folks looking for higher yield opt for a HYSA.
The advantage of a HYSA over a traditional savings account or treasuries is twofold. First, you get a much better return. At the time of writing you can get a fee free FDIC insured savings account yielding 4-5%. Second, it’s super convenient! Treasuries require you to invest through Treasury Direct (the not user friendly, official government website) or a traditional online broker. Neither is as fast or liquid as a savings account since you would have to sell your treasury on the secondary market if you needed the money before the treasury is redeemable.
So now that we know a regular savings account stinks and that a high yield savings account is just as secure and easy to use, let’s give some suggestions based on what we use:
At the time of writing Betterment Cash Reserve is offering a yield of 4.75% APY and $2 Million ($4 Million for a joint account) in FDIC insurance. That means on our hypothetical deposit of $10,000 you’d earn $475 with as close to zero risk as possible.
Betterment isn’t a bank but the partner with multiple FDIC insured banks to create a high yield savings program managed by Betterment. That’s how they’re able to offer such competitive rates and higher FDIC insurance levels than a single account at a traditional bank.
Betterment is our favorite because of it’s strong rate of return, easy to use app and website, and how fun it is to dream about having $4 Million dollars in need of insuring.
2. Marcus:
Marcus is the online consumer banking arm of legendary investment banking firm Goldman Sachs.
Marcus offers a traditional high yield savings account with $250K of FDIC insurance at a rate of 4.5% at the time of writing.
While the return is slightly below Betterment and offers less FDIC insurance (let’s be real, most of us don’t have that kind of cheddar laying around anyway) Marcus shines in a few other areas.
The app is quick and easy to use. Transfers/deposits in and out of Marcus are crazy fast (transfers up to $100K out of Marcus submitted before 10 AM Eastern time will process the same day before 5 PM Eastern). And if you want better rates and don’t mind locking your money up, Marcus offers competitive rates on CDs in the same app.
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