High-yield savings offer zero risk
As long as you open a savings account at a legitimate bank that is FDIC-insured, "there is zero risk of capital loss," says Gordon Achtermann, a Virginia-based certified financial planner.
What are the best banks for high-yield online savings accounts?
Best overall: Marcus by Goldman Sachs High Yield Online Savings. Best for checking/savings combo: Ally Online Savings Account. Best for easy access to your cash: Synchrony Bank High Yield Savings.
There are two companies – Insight and Netspend – that offer prepaid debit cards that also come with FDIC insured savings accounts that earn 5% interest. They take some work to set up, but once you go through that process, the accounts run themselves.
Online transfers between your physical checking account and your online savings account take a few days. So if you need money immediately, you may be out of luck. You can't withdraw money from an ATM or at a physical branch unlike accounts held at brick and mortar banks.
In short, MMAs might be a better option, depending on the rate, if the goal is to park some cash for a short period, or if you don't want to actively manage your savings. MMAs provide access to your money when you need it, pay a higher rate than savings accounts while requiring a minimum amount of effort on your part.
How much interest can you earn on $1,000? If you're able to put away a bigger chunk of money, you'll earn more interest. Save $1,000 for a year at 0.01% APY, and you'll end up with $1,000.10. If you put the same $1,000 in a high-yield savings account, you could earn about $5 after a year.
According to the FDIC, the average savings account interest rate in the U.S. sits at a low 0.05%. When choosing a high-yield savings account, you want to make sure you find one offering an APY greater than the average 0.05% that you would earn in a standard savings account.
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