What is a High Yield Savings Account?

When it comes to saving money, we all know the drill. You set aside some cash, maybe open a savings account, and hope it grows a little over time. But let me be real with you; traditional savings accounts are a joke. The interest rates are tiny and your money isn’t really growing like you want it to. But good thing there is such thing as a high yield savings account (HYSA), a simple yet effective way to make your money work harder for you.

Let’s break down what a high yield savings account is, why it’s better than a regular savings account, and why we personally use Marcus by Goldman Sachs to grow our savings.

What’s the Deal with High Yield Savings Accounts?

In a nutshell, a high yield savings account is a savings account that offers a much higher interest rate than a traditional one. I’m talking higher – like 10 to 25 times higher. So, instead of making pennies on your savings, you’re actually making some serious cash.

Think of it like this: a typical savings account might give you an interest rate of 0.01% (seriously, that’s what some banks offer). On the other hand, a high yield savings account can offer anywhere from 1% to 4% (sometimes even more), which is a big win if you’re trying to grow your emergency fund, save for a vacation, or even stack up some cash for a future home.

How Do High Yield Savings Accounts Work?

The way it works is simple. You deposit money into the account, and in return, the bank pays you interest. This interest is compounded, meaning you earn interest not just on your original deposit, but also on the interest that’s already been added. So, over time, your money continues to grow.

For example, if you deposit $10,000 into a high yield savings account that offers a 3% interest rate, you’ll earn $300 in interest after one year (assuming you don’t withdraw anything). That might not sound like a ton at first glance, but imagine doing that with $20,000 or $50,000. Plus, over time, that compounding really adds up.

High Yield Savings vs. Traditional Savings Accounts

Now, let’s talk about why a high yield savings account is the better choice compared to a regular savings account.

1. Interest Rates:
   The biggest difference is the interest rate. Traditional savings accounts are barely worth your time with rates like 0.01% to 0.05%. A high yield savings account, on the other hand, offers 10-25 times more interest. So, you’re making way more money with less effort.
2. Access to Your Funds:
   Both types of accounts allow you to access your money anytime, but the main difference is that many high yield savings accounts are offered by online-only banks. This usually means you get better rates, but you might need to be okay with doing everything online. For some, that’s a win because there are no physical branches to deal with. For others, it’s a bit of a downside. But trust me, the higher rate is worth it!
3. No Fees:
   Traditional savings accounts sometimes come with maintenance fees or minimum balance requirements. High yield savings accounts usually don’t have any fees or balance requirements, making them perfect for people who just want to save without worrying about extra charges.
4. FDIC Insurance:
   Both types of accounts are typically insured by the FDIC (Federal Deposit Insurance Corporation). That means your money is protected up to $250,000 in case the bank goes under. So, you’re not only getting better interest, but your savings are also secure.

Why You Should Consider a High Yield Savings Account

Now that we’ve covered what a high yield savings account is and how it works, let’s talk about why you should consider opening one.

1. Earn More on Your Savings:
   The main reason to use an HYSA is to make your money grow. Whether you’re saving for an emergency fund or just trying to stash away some extra cash, a high yield savings account helps your money work harder. With better interest rates, your savings will grow faster than they would in a regular savings account.
2. Safe and Low-Risk:
   High yield savings accounts are a safe place to park your money. You won’t have to worry about the risk of losing money like you would with investments in stocks or real estate. Plus, with FDIC insurance, you can sleep easy knowing your money is protected up to $250,000.
3. Build Financial Discipline:
   One of the best things about high yield savings accounts, especially the online-only ones, is that it encourages good saving habits. Having your money in an account where you can’t just swipe a debit card to access it means you’re less likely to spend it on a whim. And the best part? The longer you leave it in there, the more your money grows!

Why We Use Marcus by Goldman Sachs

There are a ton of high yield savings account options out there, but we decided to go with Marcus by Goldman Sachs, and here’s why.

1. Great Interest Rates:
   Marcus consistently offers some of the best interest rates available, so our money is growing faster than it would in a regular savings account. We like that we’re getting more bang for our buck.
2. No Fees, No Minimums:
   We’re big fans of the fact that Marcus doesn’t charge any fees or require a minimum balance to start earning interest. This makes it super easy to get started, no matter how much money you have to save.
3. Easy Online Platform:
   Since Marcus is an online bank, we can easily manage our account, make transfers, and check our balance from anywhere. It’s a super user-friendly platform, and we love that we can do everything right from our phones or computers.
4. FDIC Insured:
   As I mentioned earlier, Marcus is FDIC insured, so we feel safe knowing our savings are protected. This is a non-negotiable for us when it comes to choosing where to stash our cash.
5. Great Customer Service:
   Even though Marcus is online-only, their customer service is top-notch. Whenever we have a question or need help, they’re quick to respond and always helpful.

Final Thoughts

A high yield savings account is an easy way to grow your savings without taking on much risk. With higher interest rates, zero fees, and the security of FDIC insurance, it’s a great option for anyone who wants to put their money to work. If you’re ready to take your savings to the next level, we highly recommend looking into opening a high yield savings account. And if you’re looking for a solid, reliable option, Marcus by Goldman Sachs has been a great choice for us. Use our referral like here.

So, stop letting your money sit stagnant in a regular savings account. Put it somewhere that will actually help it grow, because you deserve to earn more. Let your money do the heavy lifting!