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How, the place, and why to make use of a excessive yield financial savings account

As you get more and more mature in your financial position, you will increasingly want it Diversify your accounts. When starting your financial journey for the first time, it's okay to only have a checking account. However, the more money you accumulate, the more you want to keep it on different account types. IRAs, 529s, Roths, 401ks, checks, savings – these are all different types of accounts, all of which serve different purposes.

Knowing where to put your money and how much to go into each account type is a matter of personal preference. This will depend on your individual situation, including your age, number of children, marital status, and proximity to retirement. In this article, we're going to talk a little about how to get the most out of a high yield savings account.

What is a high yield savings account?

Most people are familiar with the basic concepts of a checking account and a savings account. A high yield savings account is actually no different from a regular savings account – it's just a label that indicates that it pays a “high” amount of interest. There is no official indication of how much interest a savings account has to pay to qualify as "high yield".

The interest that a savings account pays out depends mainly on macroeconomic conditions like this Federal Reserve Interest Rate. The Fed interest rate has a direct impact on the amount of interest companies pay out. Another term that is similar to a high yield savings account is a money market account. You can Compare a money market account to a high yield savings account Here.

What Kind of Money Should You Put in a High Yield Savings Account?

Now that you know a little about what a high yield savings account is, it's time to talk about how much money (and what kind of money) you should be keeping there. We have already written about it How Much Money Should You Keep in Your Checking Account?and a good rule of thumb is not very much. You should just keep enough to pay off your regular monthly bills with a little extra Avoid overdraft fees (Mint can help with this).

The reason for this is that most checking accounts hardly pay any interest. So, excess money that you want to keep liquid is a good candidate for a high yield savings account.

One type of account that will fit very well in a high yield savings account is your account Emergency fund. You want to keep your emergency balance in a separate account that you will use to pay most of your bills (usually a checking account). And putting that money into something that deserves at least a decent amount of interest is a smart financial move.

Watch out for inflation

The other thing to watch out for is not to put too much money in a savings account. While it sounds nice to make 0.5% or 1% or 2% of your money, you have to consider inflation. If you are making 1% of your money but inflation is causing your cost of living to increase by 2%, you have actually seen a 1% reduction in your actual purchasing power.

While it's a good idea to keep some money in an emergency fund that can be easily accessed in an emergency, you don't want to keep too much in it. $ 1000 is a good starting point for an emergency fund, but you want to gradually increase this to a few months if you can. In addition, investing in assets such as the stock market should be invested in, where inflation outperforms returns.

Where can I find a good savings account?

If you're looking for a good high-yield savings account, check out our curated lists of best checking account deals and the best savings accounts.

It is important to know that at a time when interest rates are relatively low, the actual differences between two different interest rates are tiny. If you've invested $ 2,000 in a high yield savings account, the difference between a bank paying 0.5% and a bank paying 0.75% is only $ 5. So if there are other (non-financial) reasons to choose one bank over another, keep that in mind.

You could look too Sign up bonuses for bank accounts. Many banks and credit unions give a bonus for registering a new account. To like Sign up bonuses for credit cardsBanks do this in the hopes of keeping you as long-term customers. Earning $ 150 or $ 250 for signing up for a new account can overshadow the real interest you will get by keeping your money in the bank. Just read the fine print, the offer's terms and conditions, to make sure you are earning your bonus.

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Dan Miller (48 posts)

Dan Miller is a freelance writer and founder of, a website that helps families travel for free / cheap. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and 6 children.


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