A high-yield savings account is a great alternative to a basic savings account if you want to put your money somewhere so it can grow – but don’t want the risk of investment. Here are some benefits and drawbacks.
Benefit #1: Grow Your Savings
A high-yield savings account gives consumers the opportunity to make more money than a traditional savings account offers. You actually earn about 20 to 25 times the interest in one of these accounts compared to a basic savings!
Benefit #2: You can start with a little
Not only are high yield accounts ultimately risk-free, you don’t need a lot of money to start. Putting your money into one of these accounts keeps it safe – but watch out. There IS a drawback.
Drawback #1: Accessibility
Similar to a basic savings account, you can only withdraw money six times a month – but because high-yield accounts are typically opened at online banks and don’t have ATMs, accessing your money in a pinch is tougher.
Drawback #2: Inflation
High-yield accounts aren’t the best for long-term wealth-building, because they can’t compete with increasing prices, also known as “inflation.” They’re OK for savings, but will never make you rich.
There are better forms of investment for truly seeing your money grow. But for a no-risk option, high-yield accounts are still better than the basic savings we’re typically offered. Consider moving your savings into one!