Be very careful.
You’re told to save for big-ticket items and develop your reserves, and the best way to do that is to save. What they don’t tell you is that when you put your money in a traditional savings account, the interest you earn on it is below inflation. Why does that matter? Every month you keep your money in a standard savings account, it loses value. Enter the high-yield savings account. On average, this type of account pays 20 times the interest offered by the average savings account, which provides some protection against inflation.
However, to maximize the benefits offered by a high-yield account, you need to know what to look for.
Digital Banking
Use an FDIC-insured bank with a robust digital component, so you don’t need to go into a branch or call a call center to complete basic functions.
High APY
Presently, traditional savings accounts offer 0.05% annual percentage yield (APY), whereas high-yield savings start at 1%. The higher the APY, the more you’ll earn annually which is the only reason you’re using the type of account.
No Bank Fees
Bank fees can be detrimental to your savings and can eventually take more per year than you’ve gained in interest.
Access to Your Money
Access should be a deal-breaker. The bank you choose should offer you immediate access to your money if you need it. In the case of an emergency, you won’t be able to wait 30 days for the funds to clear or skip the waiting period by paying a steep penalty fee.