3 things to consider when searching for a high-yield savings account
There are many high-yield savings accounts to choose from
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With the uncertainty in the global markets and rising inflation, experts recommend having access to about three to six months of living expenses in a liquid emergency fund that will provide a cushion should you encounter a setback like a job layoff, a sudden car repair or a medical emergency.
To stretch your savings, it’s worth the time, effort and research to find a high-yield savings account.
Here are three pro tips to help you find a well-performing high-yield savings account.
HOW MUCH MONEY SHOULD HOUSEHOLDS KEEP LIQUID, AND IN WHAT FORM, FOR EMERGENCIES?
Research savings account options online
Sites like Bankrate.com make it simple to compare rates.
Every listing is a federally insured financial institution and many of the most competitive offerings are available with little or no minimum deposit, according to Greg McBride, Bankrate.com's chief economist.
"Everyone needs emergency savings and online savings accounts are literally available to everyone," McBride said.
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THE PROS AND CONS OF LIQUIDITY
Review the terms of a high-yield savings account
From a consumer perspective, the good news is that there are a plethora of high-yield savings accounts to choose from.
First, it’s vital to understand the account’s annual percentage yield, or APY. James Morgan, vice president of savings and forecasting at Capital One, advised that when you’re looking for a high-interest savings account, it’s important to pay attention to the APY, as the higher the APY, the more interest you earn.
"Additionally, we recommend choosing an account with no minimum balance requirements and with no fees – that way, none of your savings will be spent on bank fees and the money you deposit will grow from interest alone," Morgan said.
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For example, he pointed out that many Capital One customers pick Capital One’s 360 Performance Savings account to store retirement funds, emergency funds or savings for large purchases.
"Compared to traditional savings accounts, high-yield savings accounts pay more interest on the money you put into the bank, which can accumulate more money over time," he said. "With Capital One’s 360 Performance Savings, customers will earn one of the top savings rates on all balances."
Lastly, convenience is key for banking. At Capital One, said Morgan, customers can conveniently move money between linked Capital One accounts or external bank accounts, set automatic savings plans, create multiple performance savings accounts and deposit checks almost anywhere or anytime at the convenience of their smartphone.
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Consider a credit union
As part of your research, consider contacting a credit union to inquire about high-yield savings accounts.
"Credit unions are member-owned, not-for-profit financial institutions with no shareholders," said Dawit Kebede, senior economist for the Credit Union National Association. "They reinvest their earnings back to members in the form of high-interest rate on savings, low-interest rate on loans, and lower fees."
If you are thinking about opening a high-yielding savings account, a local credit union could be a great option; however, credit unions have membership requirements to join, there are fewer branches, and a credit union may not be part of a network of ATMs for banking on the go.