High-Yield Savings Accounts: What is all the hype about?
in Managing Money & Credit, Planning for Retirement
Want to make some money? Excited to watch your savings grow? Today’s high interest rates create opportunities for savers to earn decently.
High-Rate Savings Accounts Yield Great Returns
High-yield savings accounts are now offering interest rates that haven’t been seen since the late 1980s and early 1990s. What is a high-yield savings account? It’s an interest-bearing savings account that provides a higher rate of return than standard entry-level accounts.
In recent years, many savings accounts offered by financial institutions paid either very little interest (typically just a fraction of 1%, which might add pennies to a monthly statement), or none at all. Those meager returns didn’t motivate many people to put money into a savings account, and frankly, why would they? Stashing money under the mattress at least saved a trip to the branch or ATM, and the cost of gas to get there.
Thanks to today’s high interest rate environment, those days are a distant memory. High-yield savings accounts offer rates that accumulate into meaningful amounts of money. Plainly put, if you’re letting your money sit in an account that isn’t earning at least 4% interest, you’re losing money.
What’s more, the time to take advantage of these rates is now because they won’t last forever. The return of high-yield savings accounts is a direct result of decreasing demand in the loan market. Eventually that demand will return, and when it does, the interest rates offered on savings accounts will likely reverse course.
Younger Savers Can Benefit from High-Yield Savings Accounts
High-yield savings accounts are especially well-suited for younger savers. They are the best savings accounts for millennials building up a down-payment for a first home and the perfect place for setting aside funds for an emergency. Certificates can offer even better rates, but they aren’t liquid. Cash them in before they mature and the interest is penalized, and possibly forfeited.
With a savings account, the money is there when you need it, with no penalties for early withdrawal and the compounded interest is yours to keep. If you have the funds to maintain both, that’s a smart move, but if you want quick access to your money for that perfect house that just came on the market or to handle an emergency, a high-yield savings account is the way to go.
Saving for the Short and Long Term
Life happens, which is why liquidity is important and an emergency fund is essential. In a pinch you might need access to cash from an ATM, money that’s easily transferred into another account, or proof you can make the rent or follow through on a reservation or commitment.
Rather than keeping that cash on hand or in a basic checking account, putting it into a high-yield savings account keeps it available and growing until the day you need it. And if that day never comes, you’ve gained interest on your money. Save your money, earn interest on it, and have it available when you want or need it. That’s a win-win for yourself and your loved ones.
Watch Your Savings Grow at Lafayette Federal
At Lafayette Federal, we strive to meet our members where they are, whether you want to borrow money or save it, and we’re offering exceptional opportunities for our members to achieve either goal. Our high-yield Preferred Savings Accounts require a minimum deposit of just $50 and if maintained at or above that level earn an Annual Percentage Yield (APY) of 4.20% (4.27 APY), compounded quarterly. While 4.20% on $50 won’t add up to much, making regular contributions can reward you significantly. For example, a $100 contribution to that account from a bi-weekly paycheck will net you $2,694.44 after a year. Open an account with $5000.00 and in one year it will be worth $7,855.64. $10,000 will earn $426.66 in interest alone, with no contribution.
For accounts with a minimum balance of $20,000, we offer an interest rate of 4.50%, with an annual yield of 4.58%. Add $100 from every paycheck for a year and you’ll have $23,561.23 in liquid cash that can be easily accessed for emergencies, earnest money deposits, or spontaneous adventures. And at Lafayette Federal, your account is protected and federally insured up to $250,000.
Open a high-yield savings account with us today: it’s been a long time since making money was this easy.
