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One of the biggest concerns that many have these days is that of helping their money go further. However, this is balanced against wanting the security associated with cash. For those who are interested in building emergency savings, or just using some cash products as low risk addition to a portfolio, a high interest savings account is of interest. Because yields on such accounts follow the Fed Funds Rate, the yield today isn’t near what it was three years ago before the global financial crisis. However, a high interest savings account is going to yield more than the traditional account that you open at your local brick and mortar bank.
Look Online for a High Interest Savings Account
One of the best places to go when you want a high yield savings account is the Internet. A number of sites, from Bankrate.com to Moolanomy.com routinely provide information on the best interest rates for savings accounts. Armed with information about where you can open a high yield account, it is possible for you to earn the best return on your money. It is important to pay attention, though. Here are some of the terms to consider when choosing a high interest savings account:
- Minimum opening deposit
- Minimum balance
- Whether you can link to other accounts
- Monthly fees
- Limits on withdrawals
- Introductory interest rate (some accounts lower the rate of return after the first few months)
- Double check to make sure that the financial institution is FDIC insured
Once you have found an account that you like, you can fill out an application and get things rolling. With everything connected, it is often easy to open an account with a distant bank — without ever having to go in.
High Yield Savings Alternatives
In addition to opening a high interest savings account, there are other options to consider. This can include money market accounts, high yield CDs and even some bond funds.
A money market savings account works like a regular savings account, but higher interest is usually offered, as they follow money market rates. Normally, though, you have to have a minimum balance requirement, and you may only be able to withdraw money three times a month. Some money market savings accounts do allow you to write checks, though.
Another option is to consider high yield CDs. These CDs sometimes have higher deposit requirements, or longer term requirements. In some cases, the interest rate may be variable, or there might be a call option that allows for a higher rate of return until the call period is over. Setting up a CD ladder with high yield CDs can be one way to build emergency savings or practice capital preservation.
Finally, there are bond funds and money market mutual funds that can provide you the benefits of lower risk while offering slightly higher returns. Money market mutual funds have the potential to lose money, but that is a difficult scenario. Bond funds are sometimes considered only slightly riskier than cash. Some bond funds, like Ginnie Mae funds, are backed by the U.s. government, lowering their risk. And some funds operate much like bank accounts, allowing you to write a limited number of checks.
Don’t Just Chase Interest Rates
Be careful, though. While most CDs and money market savings accounts are FDIC insured, money market mutual funds, bond funds, and some CDs are not FDIC insured. The risk of losing your money is greater, along with the possibility of slightly higher returns. Make sure you understand this before choosing an alternative to a high interest savings account.
Best High Interest Savings Account Online
- Low $1,500 initial-deposit requirement
- No-fee Online and Mobile Banking
- Up to six withdrawals per month
- 3 month bonus rate for new signees
- FDIC Insured
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