Putting your cash to work: High Yield Savings Account edition
Welcome to our cash management series. In this three part series we’ll be going through ways you can grow your money in a rising rate environment. In today’s article, we’ll go over High Yield Savings Accounts (HYSAs) and how they can be used to grow your money.
Introduction
“Where should I put my cash?”. The short answer is, wherever you can get the best yield with the liquidity parameters you need. One of these cash vehicles is the high yield savings account, better known as a HYSA.
What is a HYSA?
High yield savings accounts offer savings rates that are 20-25x higher than the traditional national average. In the era of online banking, competition over savings rates has heightened where you’ll typically find the best rates with online banks.
The tradeoff when opening a HYSA is that you’ll likely have to switch your savings account to a different bank than your checking account to secure the best rate. While this may seem like a hassle, money transfer is very simple and happens rapidly.
What is the maximum amount I could deposit?
There is no maximum on how much you can deposit, though it is recommended that you work with a bank or credit union that is FDIC insured (up to $250,000) or NCUA insured (up to $250,000).
How does my money look with a HYSA?
A $10,000 deposit held in a HYSA at 3.00% (as of November 2022) will yield $300 at the end of the 12 months. The same deposit compared with the national average of 0.43% will yield $43 at the end of 12 months.
How do I deposit cash into a HYSA?
It is recommended that you contact your local bank to find out their best HYSA savings rate. Likely, you’ll find the best rates with online banks. Here are some questions to keep in mind when deciding on a HYSA:
Interest rate: How much is the offered rate and is this rate fixed or the product of a temporary promotion?
Require initial deposit: Is there a minimum deposit required to get the advertised rate and are you comfortable making that deposit?
Minimum balance threshold: Are you able to meet the minimum balance threshold comfortably? (Note: being unable to do so would negate the earnings made through the account).
Fees: Does your account charge fees for keeping your money or fees if the balance gets too low?
Conclusion
In high inflation times it’s important to understand that there are still opportunities to grow your money. Putting cash into your savings account is a risk free way to grow your money without worrying about market volatility. While it is a way to grow your money, it should not be the only vehicle for growing your money – think of it as a baseline for your saved up money. Other vehicles can be stocks, bonds, ETFs, and CDs. If you’re interested in a free consultation with a top rated Sora Financial Advisor, you can schedule a meeting here.
That concludes our three-part series on putting your cash to work!
