Pros and Cons of a High Yield Savings

Find out the pros and cons of a high yield savings account

Many of like to save our money and what makes saving money even better is when you can get a nice return on your money while it’s just sitting there.  If you’re like me and you love to have a guaranteed return, you may find yourself turning to either a certificate of deposit (CD) or a high yield savings account.  While a high yield savings account has both its pros and cons, I wouldn’t count it out while you’re looking to invest your money somewhere.

Look at the cons with high yield savings

Rates aren’t guaranteed

Unlike a CD, a money market or savings account doesn’t have a guaranteed rate.  You could apply for an account one day and a few weeks later the account rate could drop a whole rate.  This is what turns a lot of people off by it.  A nice way of checking to see who has had the most consistent rate for the past couple months is by checking GOtalkmoney’s top ten money market chart.  On the chart, you’re able to see how long they’ve been in the top ten consistently.

Limited access to money

With a money market account ,most banks only allow you to access and create checks only a few times per month.  If you’re a heavy user with your savings account, you probably won’t want to keep all of your cash in this account.  Instead, you’ll want to keep money in there that you won’t touch for a while.  If you find yourself cutting out checks more than the bank allows, you’ll find yourself getting a penalty from the banking institution.

Looking at the pros with high yield savings

Higher rates than your normal banks

If you look at your local banking institution savings account and see how much they are giving you back on your money, you’ll be surprised to see how little you’re making on your money.  The nice thing about a money market account is that you’re going to be able to make a lot more on your money compared to traditional savings account at your local bank.

Acts like a bank’s saving account

With a money market account, you’ll find that it acts just like as a savings account but as I mentioned above, you’ll only be able to make so many transactions per month.  When you do sign up for a high yield savings account, most banks will grant you access to an ATM card, a check book and many other goodies that you can use with your account.

In the long run, if you’re currently having your money just sit in a traditional savings account, I would highly advise you move it to a money market account.  This way, you’ll be able to get a lot more on your money.  Just remember to search around for the best rates possible before you just hop on the first rate you’ll see.

Spending your Tax Rebate Check

What you should do with your tax rebate check.

If you currently live in the United States and haven’t heard of George Bush’s tax rebate plan, you’ve probably been hiding under a rock.  If you’re unfamiliar with it, it was a bill passed by the president to help boost the struggling economy.  Depending on your situation, you can receive up to $600 per person.  Now, what exactly do you do with this tax rebate?  Do you go out and help the economy or do you save it?

Your emergency fund

Do you have an emergency set up?  If you don’t even know what this is, you’re in deep waters already.  An emergency fund is anywhere from three to six months of your expenses.  This is where you’re going to store this money for a rainy day.  If you lose your job or an unexpected emergency happens, where are you going to get money?  If you don’t have this type of fund set up, I highly advise you start an account today, it’s never too late.

Let’s attack those pesky bills

Whether you’re in debt or you’re caught up on your bills, it’s always a good thing to start attacking those bills that are bothering you.  If you’re caught up on your bills and paying them off isn’t a problem, then that’s great, we can use this money elsewhere.  If you’re currently finding yourself struggling with debt, make sure that you attack those smaller bills first and proceed to knock off the larger ones.  Keep in mind that you should be paying the minimums on the rest so that you don’t damage your credit score.

Why not invest

Even though the tax rebate is designed to stimulate the economy, it doesn’t mean you can’t save it.  It’s your money; you can do whatever you want with it!  If you haven’t started investing for the future yet, now is the time and it’s never too late.  Grab a book or start doing your research on mutual funds, stocks, 401ks, IRAs, and more.  There are so many ways to invest out there.  Make your money work for you.  Don’t let it just sit in a lousy bank account collecting next to nothing in interest.

Add a little extra to your house

Do you currently have a thirty year home mortgage?  If your answer is yes, does it seem like the bill is never paid off and it’s all going to interest?  Well, believe it or not, a few extra bucks on top of your current payment can go a long ways.  Sometimes a few hundred a month extra can knock off a year’s worth of payments down the road.  Refer to mortgage calculators online to see exactly how much you can save.  If you want to have a paid off house, simply add this check to your next mortgage bill, you’ll be thanking yourself in the long run.

These points should show you a little something by now.  Instead of going out and blowing this rebate check on a stupid video game or expensive dinner, why not invest into your future.  Over half of today’s Americans don’t even know how to save or even have a penny in their savings accounts.  Do you want to rely on the government when it comes to your retirement?  Your retirement is supposed to be enjoyable and relaxing.  Don’t keep spending today so you have to eat ramen noodles tomorrow.

Treat Savings as a Bill

Can't save your money? Why not create a bill?

Most Americans today don’t save enough money. In fact, over 70% of Americans don’t save what they should save. Why is this a big number? It’s simple. People like to spend money and you could be in that crowd. The big question you need to ask yourself is how you exactly everyone saves money.

Saving money isn’t hard and in fact, if you just save a little bit a month from an early age, that money will go a long ways once retirement comes up. Just take a pizza for example. If your family doesn’t eat out at least once a month, that’s fifty dollars right there that could possibly dip into a mutual fund, stock, savings account, etc. I think you get the picture.

Let’s say you’re not a disciplined person with your money. A nice and easy way you can save money is creating a “fake” bill each month and billing yourself. Treat this bill as if it were your mortgage bill, gas, etc. Instead of this money going to the corporations, it will go into a separate savings account.

The process is quite simple. Start up a money market account anywhere in your neighborhood or online. Every time you pay your savings bill, the money will go directly into this account. The reason we pick a money market account is for a few reasons.

A money market account only allows so many withdrawals per month. So if you’re having that spending temptation, you will remember that bank will slap on a banking fee for taking that money out. This might encourage you to back down on the spending a little bit.

If you do decide to go with an online money market, you will find it takes a few business days to get back to your money. If you’re an impulse buyer, this is great. Instead of having the bank right around the corner where you can get the money at any time, you won’t be able to access this money until a few business days. By the time it got there, your impulse buying distinctions would probably be gone.

Even if you’re a disciplined saver, it’s always nice to be organized. This is why a fake “saving” bill would help you out. Every time you made a payment on your bill, you could file it away and look back at it at the end of the year to see exactly how much you have saved.

Savings in the long run is completely up to you. As bad as it sounds, sometimes you need to think long-term because you don’t want to work the rest of your life. Thinking about today can shave a few years off of your working life!

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Disclaimer:This content is not provided or commissioned by American Express. Opinions expressed here are author's alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.

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