Want to make more on your cash? Consider a high-yield savings account

For as long as I've been alive, interest rates were at their lowest levels in history....that all changed starting last year and has been a "wake up" call for many of us out there. Many of you have probably read or heard, "The Fed raised rates... again!", "Home rates are at their highest level in decades.."Home-affordability has never been lower..". All of this sounds negative and for many, poses its challenges. On the flip side of the coin, there are benefits for savers.

How does this impact me? In a number of ways, but the focus is on how you can benefit from rate hikes. If you have money in the bank (checking, savings, money markets, etc), higher rates mean banks typically pay more in interest to their account holders (you). The issue...most large banks (household names) only pay fractions on the money you hold in your accounts, which results in you limiting your earning potential.

So.... what should I consider? If you have extra savings laying around (savings accounts, money market accounts, CDs, etc), consider opening a high-yield savings account to boost your savings and maximize your "yield" (money you make on your money). For example, say your bank is paying 0.01% (many large banks are so if you bank with a large company, check your statement and see how much % their paying you) and you have $10,000 in the account. Your bank is smiling since they're only paying you $10/year....

On the other hand, say you're in a high-yield savings account paying you 4.25% (yes, there are many out there paying this currently). You'd received $425/year... much more than $10... Won't make you rich, but it's the discipline of looking for the highest "yield" out there and maximizing your savings.

So, What is it?....

High-yield savings accounts have become popular options for individuals looking to save and earn some interest on their money while keeping it easily accessible. Like any financial product, they come with their own set of pros and cons.

Pros of High-Yield Savings Accounts:

1. Higher Interest Rates: As the name suggests, high-yield savings accounts offer significantly higher interest rates compared to traditional savings accounts. This means your money can grow at a faster rate.

2. Safety: These accounts are typically offered by established banks or financial institutions, making them a safe place to park your money. Many high-yield savings accounts are also FDIC-insured (up to $250,000 per depositor per bank), providing an extra layer of security.

3. Accessibility: High-yield savings accounts are designed to be easily accessible. You can withdraw funds whenever you need them, typically without facing penalties or fees.

4. No Minimum Balance: Many high-yield savings accounts do not require a minimum balance to open or maintain the account. This makes them accessible to a wide range of savers.

5. Liquidity: You can access your funds quickly and easily through ATMs, online transfers, or in-person visits to the bank, making them a good choice for emergency funds.

6. No Risk to Principal: Unlike investing in the stock market or other investment vehicles, your principal (the initial amount you deposit) is not subject to market fluctuations. It remains safe and secure.

Cons of High-Yield Savings Accounts:

1. Lower Returns Compared to Investments: While high-yield savings accounts offer better interest rates than standard savings accounts, they generally yield lower returns compared to other investment options like stocks, bonds, or mutual funds.

2. Inflation Risk: High-yield savings account interest rates may not always keep up with inflation, which means that the purchasing power of your money may decrease over time.

3. Interest Rate Fluctuations: Interest rates on these accounts can change over time, and they are influenced by market conditions and the policies of the financial institution. This can lead to fluctuations in your earnings.

4. Penalties for Excessive Withdrawals: Some high-yield savings accounts have restrictions on the number of withdrawals or transfers you can make each month. Exceeding these limits can result in fees or account closure.

5. Account Fees: While many high-yield savings accounts have no monthly maintenance fees, it's essential to check the terms and conditions, as some institutions may charge fees for certain activities or if your balance falls below a specific threshold.

6. Online-Only Accessibility: Many high-yield savings accounts are offered by online banks, which means you may not have access to in-person customer service or physical branch locations.

Look, these aren't going to make you rich or help you retire tomorrow... but it will help maximize your earning's with existing cash you have laying around. If we all asked ourselves, "if I could earn more on my cash, would I?"... I think we all know that answer. Many "online" banks are offering much higher rates than your typical "brick and mortar" bank so keep that in mind while conducting your search. Type "high yield savings accounts" in your next Google search and research some of the banks and grow your savings.

Happy earnings!

Retirement Discipliner