When it comes to saving money, choosing the right account can really impact your financial progress. Over the last few years, high-yield savings accounts have become a popular option for those looking to grow their savings faster.
When you’re looking for a high-yield savings account in Texas, there are a few important factors to keep in mind before setting up your new account and working towards your bigger savings goals.
What is a High Yield Savings Account?
Before you can open a high-yield savings account, you should know what they are and why they’re different from standard savings accounts. An HYSA is a type of savings account that offers a much higher interest rate than a traditional savings account. This means that your money can grow faster over time without having to lock your cash away in a long-term savings plan.
HYSAs can be an attractive option if you’re looking to earn more on your savings deposits without taking on additional risks that come with other types of investments. In many cases, high-yield accounts can provide interest rates up to 20-25% higher than standard savings accounts.
The Benefits of a High-Yield Savings Account
Higher Interest Rates
One of the most significant benefits of a high-yield savings account is the higher interest rates it offers. These are typically some of the most competitive rates for savings accounts, even with market fluctuations.
These higher rates mean that your money will grow more quickly, thanks to compound interest. For instance, if you have $1,000 in your savings account and you don’t touch these funds, and the account has a 4% interest rate, you’ll have earned $40 in interest by the end of the first year. If you continue to leave this money alone, by year five, you’ll have over $200 in interest earnings alone.
Safety and Security
HYSAs are offered by reputable financial institutions like banks and credit unions. They’re also insured by the National Credit Union Association (NCUA) for deposits up to $250,000 and ESI for up to $750,000. You can have peace of mind when you open your HYSA with Community Service Credit Union that your money is protected.
Liquidity
Unlike many other high-yield investment options, HYSAs allow you to access your money whenever you need it. This makes them an ideal choice for savings, such as your emergency fund or other short-term savings goals that you may need to use at any time.
You’re still able to earn more interest on any funds you’re saving in a high-yield savings account, but you don’t need to worry about being locked into a long-term commitment like a certificate of deposit (CD) or savings bond.
Low Fees
Most high-yield savings accounts have low or no maintenance fees, which means more of your money will stay in your account. It’s always important to check this before opening an account, as you want to make sure that, if you do need to make a withdrawal, you’re not dropping below any minimum balance requirements that would mean you’ll pay a fee.
Choosing an HYSA
When you’re selecting a high yield savings account, it’s important to keep several factors in mind to find the right account type for you and your savings goals.
Interest Rate
You’re likely looking at high-yield savings accounts because you want to benefit from the higher levels of interest. So before you open a new account, look carefully at the interest rates and what the clauses on these are—some accounts will offer a high introductory rate to entice you before dropping significantly after several months.
You want to maximize your earnings, so take a look at what competitive rates you can find at local banks and credit unions. Understanding the annual percentage yield, or the actual rate of return on your money, is important when comparing accounts. A good APY for a savings account is around 5%.
Minimum Balance Requirements
In order to earn the highest rates of interest, some HYSAs require a minimum balance in your account. Make sure you’re comfortable meeting these requirements if you’re considering an account like this.
Fees
There’s also the possibility that a high yield savings account you choose could have a fee attached, like a transaction fee when you withdraw money or a monthly maintenance fee. Not all HYSAs have a fee, but as some do, it’s important that you choose an account with the lowest fee possible to ensure that any money you have in the account is yours to keep and earning you more.
Accessibility
Having easy access to your money is essential. Check what requirements are on your HYSA and if you can easily transfer, withdraw, and deposit funds. Online banking, mobile apps, or ATM access are some of the features you should look for when choosing a high yield savings account.
Making the Most of Your High-Yield Savings Account
There are many ways to make the most of your savings when you have a high yield account, from automating your savings each month to planning ahead for your short term goals.
Automate Your Savings
Setting up automatic transfers to your HYSA means that you can make consistent contributions from your checking out without having to think about it. You’ll never forget to save when you set up a weekly, biweekly, or monthly transfer to automatically move a set amount from your checking to a high-yield savings account. Over time, your money will continue to grow.
Regularly Review Your Account
Always review your financial accounts, but especially your high yield savings. This helps ensure you’re still getting the best interest rate possible and you can make any adjustments you need. Many banks and credit unions will adjust their interest rates over time, so staying informed and aware of how your account is operating will help you make the most of your savings.
Use for Short-Term Goals
For your short term financial goals, high yield accounts are one of the best ways to earn more money faster. Use your HYSA for an emergency fund, since you can keep saving but have access to your money if you need it, or other short term goals like vacations, a new car, or setting aside money for a home downpayment.
Keep your HYSA savings goals from one to three years, which will allow you to benefit from the favorable interest rates over time and make your money work for you.
Open an HYSA Today
High-yield savings accounts are one of the most powerful ways to grow your savings with minimal risk. By understanding how these accounts work, you can choose the right option to take advantage of the higher interest rates and make your money work even harder for you.