Can You Lose Money in a High-Yield Savings Account

Photo by Konstantin Evdokimov on Unsplash

Don’t lose your shirt.

If this headline made your eyes widen with the idea that your account could be ransacked by thugs, don’t worry, high-yield savings accounts are still safe –– from thieves. 

Saving using a high-yield savings account won’t make you lose money in the literal sense of the word. Any money you put in, you’ll be able to withdraw. But, when you withdraw the funds, the money you put in will have lost most of the value it had when you first put it in. 

Why is that? Record-breaking inflation. 

High-yield savings accounts are a risk-free way to grow your money. But the APYs offered by high-yield accounts pale in comparison to the inflation rate. As of November 2020, the nation’s inflation rate was 6.8% YoY, compared to the most generous high-yield accounts offering only 0.6% APY. 

To help you understand why that difference matters, imagine you put the $100 minimum deposit into a high-yield savings account to withdraw in twelve months. By the time you withdraw it, you would have earned 60 cents, whereas the cost of goods worth $100 12-months prior would now cost $6.80 more. You’ve effectively lost $6.20 by putting your money in a high-yield account.

Now that you understand how your money’s losing utility in a high-yield savings account, you should look into solutions that keep up with inflation.

Total
0
Shares
Leave a Reply

Your email address will not be published. Required fields are marked *

Previous Article

Are We Headed for a Recession? Some Early Warning Signs

Next Article

Do You Have a Disaster-Proof Emergency Fund?

Related Posts