If you don’t have money in a high-yield savings account, you are missing out on a great opportunity to grow your money. The Federal Reserve has increased interest rates multiple times in the past 18 months, and financial institutions are offering attractive high-yield rates to attract new customers. You can currently find savings accounts and certificates of deposit with APYs of 5.00% or higher, with CDs often having the highest APYs with many banks.
However, a high-yield savings account may be a better option than a CD for several reasons. Here are five reasons to consider putting your money into a high-yield savings account, especially if you are a beginner saver or trying to rebuild your savings.
1. Easy As-You-Need-It Access
When facing possible job loss or financial uncertainty, you may need to access your savings at any time. Unlike a CD, a savings account allows you to withdraw the amount you need as you need it, without closing the whole account.
2. Penalty-Free Withdrawals
Closing a CD before the maturity date may result in an early withdrawal penalty. However, with a savings account, there are no penalties for closing the account, regardless of how long it has been open.
3. No or Low Initial Deposit Requirements
Many high-yield savings accounts have no initial deposit requirements, making it accessible for new savers or those with a tight budget.
4. Ability To Add to Your Balance Regularly
A savings account allows you to make regular deposits, which is beneficial for fostering good savings habits. This flexibility is not available with traditional CDs.
5. An Advantageous Variable Rate
A variable-rate savings account can provide a better savings advantage than a fixed-rate CD, especially when interest rates increase.
Considering the uncertain economy and current high-yield savings rates, a savings account could be the better option for your cash, especially for beginner savers and those trying to replenish their savings. Once you have enough savings, you can consider moving some money into a CD when the economy stabilizes.