Martin Dasko
·5 min read
As you get better with your finances, you’ll want to look into changing your bank account so that it makes sense where you’re storing your funds. You’ll want a bank account that helps you reach your goals faster. If you have a basic savings or just a checking account, it may be time to consider opening up a high-yield savings account.
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If you’re unsure if it’s time to open a high-yield savings account, here are four signs, according to Anna Be, a certified financial educator and banking expert.
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You Want To Get Your Investing Feet Wet
“High-yield savings accounts give you the best of both worlds, because you can get a higher return and still have access to your funds if needed,” Be said.
Opening a savings account allows you to invest your money without losing liquidity, since you can easily access the funds in the account. When you invest your money into the stock market or other assets, you have to worry about price fluctuations and overall economic factors you have no control over. With a high-yield savings account — which will have a higher interest rate than a regular savings account — you can have your money work for you without taking on a major risk.
As a new investor, you don’t want to feel overwhelmed by allocating your funds towards an asset you don’t understand. If you’re new to money management or investing, you’ll want to test the waters so that you don’t take any unnecessary risks. You also don’t want to lose your money because you took on a risk you didn’t understand.
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You Want To Learn About Investing
“You’re also learning the basics of investing without taking on much risk with a high-yield savings account,” Be said.
If you’ve never invested money before, this will help you get started on learning how it works. When you open a new account, you’ll want to do some research to learn about the different accounts.
Here are a few concepts you’ll want to research about investing:
How interest rates work
Why interest rates fluctuate
How to find better interest rates
How to make money from your money
Different types of investments you can make
How to make your money grow for you over time
The different kinds of risks that you can take in investing.
The goal is to learn more about investing so that you can eventually start investing your money into other assets, once you become more comfortable.
You Have Financial Goals
“If you’re saving to buy a house or a car or cross a trip off your bucket list, then you should open a high-yield savings account,” said Be. “A high-yield savings account can help your savings grow without the risk of investing in the stock market.”
A high-yield savings account is ideal for storing funds you’re going to need easy access to while you save up for your various financial goals, because you don’t have to worry about market fluctuations or stress about your return.
If you have financial goals, you’ll want to write them out and create a timeline with steps — have a plan. From there, you can start funding your high-yield savings account, where your money will grow for you as you continue to set money aside.
You’re Losing Money
Be mentioned that you could be losing money by not taking advantage of a high-interest savings account. The reality is that you work hard for your money, so you want to ensure that your funds are growing for you instead of just remaining in an account that doesn’t bring in any return.
Be elaborated with an example:“Let’s say the annual inflation rate is about 3%, but your savings account only offers an interest rate of 1%. With prices increasing like they are, your savings would grow at a slower pace. That means over time, you’re losing money.”
What To Look for in a Savings Account
While these signs indicate that it’s time to open a high-yield savings account, not all accounts fit every person. Here are the features that you should look out for in a savings account, depending on your priorities:
The account is connected to a no-fee checking account. You can simplify your financial life by finding a high-yield savings account connected to a checking account to manage your money under one umbrella instead of opening accounts at different banks.
The interest rates are competitive. You want to find an account that offers the best rates to maximize the return on your money. Shop around until you find a decent return.
The bank has positive customer reviews. You want to look over reviews to ensure that the bank has a positive reputation with its customers.
There’s a mobile app that’s easy to use. Having a savings account with a user-friendly mobile app is helpful, so you can easily manage your funds from your phone.
There are no hidden fees for accessing your own money. You’ll want to look into the fee structure to ensure that there aren’t any random fees that would impact your savings rate.
You’ll want to take some time to review different high-yield savings accounts to ensure that you find the one that’s right for your situation.
Closing Thoughts
Opening a high-yield savings account is a simple way to take the next step in your personal finance journey. As you learn more about money management, you can look into more complex investments. For the time being, it’s essential that you let your funds grow in a high-yield savings account.
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This article originally appeared on GOBankingRates.com: I’m a Banking Expert: 4 Signs It’s Time To Open a High-Yield Savings Account
