Yearning for That Yield: What to Know About High-Yield Savings Accounts

In a high-inflation environment, investors seek out market returns. In a volatile market environment, investors seek out stability. When there’s high inflation and market volatility, investors seek to strike a balance. With that in mind, many investors believe high-yield savings accounts are the solution to finding this balance. What is a high-yield savings account, and is one right for you?

A high-yield savings account is a type of savings account that can pay up to 10 to 12 times the national average of a standard savings account. Many high-yield savings accounts are offered through online banking institutions, although traditional brick-and-mortar banks may also provide high-yield account options. Below are some points to consider when determining which type of savings account is right for you.

  1. Interest Rate

         How much interest does the account currently pay? Is it a standard rate or an introductory promotional rate?

         Savings account rates are generally flexible and can be changed at any time. But some accounts will specify that the               currently advertised rate is only available for an initial period of time. Another factor to consider is whether there                   are minimum or maximum balance thresholds for earning the promoted rate.

  1. Required Initial Deposit

         How much money is required to open the account? Do you want to deposit the minimum deposit requirement?

  1. Minimum Balance Required

    How much money are you required to keep in the account? Falling below the minimum deposit requirement can result in fees, which can offset the interest rate earnings.   
  2. Fees

Does the bank or credit union charge any fees on this account? If so, how can you avoid them (e.g., always keeping your balance above the minimum threshold)?

  1. Links to Other Banks and/or Brokerage Accounts

Will the bank allow you to create links between your high-yield savings account and deposit accounts at other banks or brokerage firms? Are there restrictions on linking multiple accounts, or is there a waiting period for new accounts?

  1. Accessing Your Money

What additional options, if any, are available for withdrawing funds? Can you withdraw funds from savings using an ATM card?

  1. Deposit Options

If you want to deposit checks into the account, does the bank have a smartphone app offering mobile check deposits? Otherwise, can you mail in checks or deposit them by ATM?

  1. Compounding Method

Banks can compound interest daily, monthly, quarterly, semiannually, or annually. More frequent compounding will theoretically increase your take-home yield. If you compare accounts by APY instead of annual interest rate, the compounding factor will already have been taken into account.

Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice. Any views expressed herein are those of the author(s) and not necessarily those of Multnomah Group or Multnomah Group’s client.

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