High Yield Savings Accounts

Answer 1

A high yield savings account can accumulate a great deal more money than your initial investment over a period of time. Though these types of bank accounts are harder to find in today's market, they still exist and are used by investors and those saving for their retirement incomes. A high yield savings account will earn you more interest than a regular savings account, accruing at different rates depending, to some degree, on economic conditions, as well as how much you invest and the frequency with which you add money to your account. It is not recommended that you take money out of this account except in dire circumstances, as this can incur penalties and will hinder the growth of your savings over time. With stock options and matching 401K contributions from employers diminishing rapidly in the unstable market, high yield savings accounts are a safe haven, and many are using them to supplement their employer-subsidized retirement benefits.

If you have more than one high yield savings account, you stand the chance of earning even more. You can use these extra accounts to save for a child's college tuition, buy a second home or refinance your current home, diversify your portfolio with hard investments like gold and silver, and more. The numerous advantages afforded to consumers through high yield savings accounts are likely to draw more people to these types of accounts over time, but the earlier one starts to save, the further ahead of the game he or she will be. It's good to start saving early so the money is there when you begin to need it. Instead of supplementing your retirement income with a part-time job or an annuity, you can draw on your own funds which have earned interest during the years you were working and adding to your savings. This has appeal for many people because it means more security than most employer-based benefits can give to a person. If, for some reason, the money needs to be withdrawn early, you will still benefit from the interest earned to date, giving you more money for an emergency or an unplanned expense.

Answer 2

Putting money into a savings account rather than in investments is primarily for use in the immediate future, such as within a year or two, or for when the volatility of investments makes you too nervous. One option for the money is a high yield savings account.

What Are High Yield Savings Accounts:

High yield savings accounts are any accounts that have a higher interest earned than the basic account. Unfortunately, the term high yield is often a misnomer because in general the highest return is around one percent or less of the money put into the account.

The keys to a high yield savings account include great customer service and an interest rate around one percent. The actual percentage of interest earned will vary depending on the bank and any special rates the bank might offer. Some accounts might require a minimum deposit or might require that you maintain a minimum amount within the account while others do not set minimums.

When to Use a High Yield Savings Account:

A high yield savings account does not earn much money. An account with $1,000 in the bank would only earn about $10 for the entire year provided the money is not removed or altered throughout the year. This small earning makes it challenging to determine when you should use a high yield account. Fortunately, a few key situations are an appropriate use of the account.

During a volatile market, when you feel uncomfortable with money in stocks, bonds, real estate or any other personal investment, a high yield savings account is an appropriate shift of funds until you feel more comfortable with your investments. As a temporary measure to remove money from the market, putting the money into a high yield account will prevent losses and earn one percent extra.

Another potential use of a high yield savings account is for your emergency cash. Emergency cash is the money that you keep readily available for any financial need that might arise suddenly. This money you do not want in investments because you might need it quickly and it might not be an appropriate time to sell off stocks or bonds when you need the cash. Keeping some money aside to handle these situations requires either a savings account or a checking account. Putting the money into a high yield savings account allows a slight growth in money while putting it into checking results in no growth.

High yield savings accounts are sometimes a smart financial move, though they earn very little interest when compared to the earnings of more volatile investments.