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What is a high Yield Savings Account?

High yield savings accounts are bank accounts that earn you a (relatively) high interest rate on all money deposited. When it comes to savings, the higher the interest rate the better because that means that you'll make a higher return on your money. 

What is an interest rate?

In this case, the interest rate is the percentage that the bank will pay you for the privilege of keeping your money (Why is it a privilege? Find out here.)

For example, commercial banks (Wells Fargo, Chase, First Republic, Bank of Hawaii) usually pay out a 0.01% interest on a traditional savings account. Conversely, interest rates on high-yield savings accounts currently range from 1% to 2.35%. That difference can really can make a difference long term.


Let's say you have $10,000 to put into your savings account. With a traditional savings account your balance after one year will be $10,001. Conversely in a high yield account your balance would be $10,235. 


That's a difference of about $235/ year from doing nothing! And that gap between the two will only increase as the years go on.


Common Questions:


Is my Money Safe?

Like traditional savings accounts, high yield accounts are federally insured up to $250,000 if it's FDIC-insured. The FDIC-insured disclosure is super important to find before choosing a bank. If not clearly stated, the account is not federally insured. 

How do I choose the right Bank?

Shopping around for the right account is key. Some have minimum monthly balance requirements, monthly maintains fees, maximum withdraws, and other associated fees. Make sure to do your research to see the features for each account. ​*Always* choose an FDIC insured bank so your money up to $250,000 will be protected. 

What would you suggest?

Everyone is different, but I personally like the Marcus by Goldman Sachs High Yield account. It's FDIC insured and has a lot of flexibility and ease, with no minimum deposit or maximum withdrawal.

How much should i be saving?

Everyone's financial situation is unique, but as a baseline, everyone should have 3-6 months worth of monthly expenses saved in an easily accessible, emergency savings fund. Then after that, a good rule of thumb is to save 20% of your income each month.

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