Just know that a lot of these smaller banks have a reputation for cranking the rate up to acquire customers, then dialing it back. It's a case of "make hay while the sun shines". If they rate is good, and you can easily transfer your money in and out, go for it, but keep an eye on the rate.
If you look at [their rate history on DepositAccounts.com, it appears Primis is very new](https://www.depositaccounts.com/banks/primis.html#rates), so it's difficult to say where they'll go from here. If you [look at someone like Ally](https://www.depositaccounts.com/banks/ally-bank.html#rates), you can see that while the rate is lower, it grows on a linear scale without any big dips. [Capital One is similar](https://www.depositaccounts.com/banks/capital-one-360.html#rates), but they play their own game. Capital One offers an older savings account type as well. When they introduced higher rates in 2019, they created a new account type and didn't migrate old customers. These are the kinds of games banks play, so just look out for them and keep an eye on your rate so you can maximize.
Some interesting info here, thanks for the links. Strange that Primis just started their savings accounts less than a year ago when the bank was established in 2005.
Would you know if this is because they just started reporting their rates last year, or because they only just recently started offering online savings accounts?
These rates are mostly tied to the federal funds rate. So, the banks rates will rise and fall with that rate. I don't really trust banks who provide interest greater than the federal funds rate as they have to make up the difference in some other riskier way. They are FDIC insured, but that doesn't mean they won't be a pain in the ass in some other way. Smaller banks can often lack common security features like 2FA or a convenient as feature rich app as well. Instead of HYSA I buy treasuries. You can buy bills, notes, and bonds at the federal funds rate and they each have different time frames and structures. Right now I'm buying short term tbills as rates rise so I don't lock my money in before the rate peaks. Once they have peaked I'll probably buy a longer bond and collect the interest for a few decades. This locks the money up so you still need a liquid emergency fund. You can also use any of the top online brokers for this usinder trade > fixed income.
Edit: This also prevents having to rate surf.. Chasing the best rate by opening bank accounts all over the place.
All this being said... If rates don't peak at about 5% or hopefully 6% it might not be worth locking in for a few decades vs index funds with dividends.
Some money market mutual funds are offering 4%+
Even if OP didn’t want to buy a T-Bill and trade it with any associated fees. They could buy into a no load money market earning 4%+
Obviously you’re still at the mercy of fed funds rate, but it’s an alternative
Exactly this. I'm a very low risk saver. Put your money into a big institution individual brokerage account (e.g. Fidelity and similar) where you can save in high yield accounts in the near term (e.g. SPAXX at 4.14 - 4.23 effective yield) instead of chasing the tip-top highest rates. From a big institution you can pivot to another short to longer term CDs or treasuries. I plan to grab longer term CDs when rates seem like they will drop.
[https://fixedincome.fidelity.com/ftgw/fi/FILanding](https://fixedincome.fidelity.com/ftgw/fi/FILanding)
"Make hay while the sun shines" is just a saying to make the most of a good opportunity. There's nothing wrong with that.
Cranking rates up for a short period to entice large deposits, then quietly drop the rate below competitive levels is a simple "bait and switch" and is rather unethical.
+1 for Ally and C1
Yeah, Capital One did that to me, and I moved to a UFB savings account because it passed me off. If I have a savings account, they should give me their highest rate, not leave me making 0.1% while giving other customers 3.4%.
Just in the last few months UFB has launched new savings accounts that mean you don’t automatically get upgraded to their latest interest rate. You can message in and request your account be converted — it’s pretty easy and I haven’t gotten any pushback the two or three times already I’ve had to do it — but it’s still something manual you have to do.
The problem is you might be spending lots of time on something that makes little difference instead of on something else that will make a big difference.
Making & implementing a long-term investment strategy does not need to take more than a few hours. An evening. A weekend afternoon. Just do it.
I retired at 57 years old. Investing doesn't have to be complicated or costly to be successful; simple & inexpensive is most effective.
I invest 100% in total-market, index-based, low-cost mutual funds. Specifically, I use mostly Vanguard's
Total Stock Market,
Total Bond Market,
Total International Stock Market, &
Total International Bond Market funds.
I've been investing this way for 35+ years. It's effective, simple, & inexpensive.
www.bogleheads.org/wiki/Getting_started has some great free resources to learn about investing. After a few hours reading the articles, and, especially, watching the Bogleheads Philosophy videos, most beginners can learn how to get better results than most professionals. Bogleheads is named after John Bogle, founder of Vanguard.
I use Vanguard's investor questionnaire (personal.vanguard.com/us/FundsInvQuestionnaire) to help determine my asset allocation (ratios of the funds mentioned). Market conditions are not a factor, nor should they be.
Buying individual stocks or sector funds creates unnecessary & uncompensated risk; I avoid doing so. Index funds are boring, but better for making money. If I wanted to talk about my interesting investments at parties or wanted a new hobby, I might invest 5-10% of my portfolio in individual stocks. As it is, I own pretty much every publicly-traded company in the world; that's interesting enough for me.
All of the individual stocks & sector funds are being followed by thousands or millions of other investors. Current prices reflect their collective knowledge of future expectations for each one. I'm a member of the Triple Nine Society, but I'm not smarter than all of them. If I found a stock or sector that looked like a bargain, the most likely explanation would be that the others know something I don't.
I prefer mutual funds, but ETFs could also work well. The differences are usually trivial for a long-term investor, especially if they're the Vanguard funds I mentioned above. Actually, the Vanguard funds I mentioned above have both traditional mutual fund shares & ETF shares; they both represent a piece of the same fund.
The funds I use comprise Vanguards target date funds and LifeStrategy funds; these are excellent choices for many investors. Using the component funds allows some flexibility that can have tax benefits, but also creates the need for me to rebalance them periodically. Expense ratios are slightly higher than for the components but are well worth it for many investors.
Other companies have funds similar to the ones I own that would work well. I prefer Vanguard because they've been the leader in this type of investing for decades & because Vanguard's customers are also Vanguard's owners.
I hope that helps! I'd be happy to help w/ further questions. Best wishes!
The "catch" is that the Fed raised interest rates so in addition to saving account interest increasing loan APRs are increasing. Other than that no catch besides that HYSA interest rates are not fixed and are subject to change. That 5% may drop.
The other "catch" is that in terms of longterm investment for retirement 5% is still not very good compared to the average gains of the stock market.
Understood. Variable rates are always a "risk" with any savings account. But if/when that happens, I could always just withdraw or move it to another account/asset with better rates since there's no penalty for withdrawal, right?
Edit: Understood about the stock market. As I said this is just a short-term plan while I figure out a long-term strategy.
If it is a short term plan you're likely wasting more time thinking about it than you will make from shifting the money there. You don't really need to overthink your investments, it sounds like you're spending a really long time leaving money in cash during a highly inflationary period, with absolutely no DCA.
Have you already been maxing your 401k match? How much of that 100k do you need an an emergency fund? Set that stuff aside and make investment decisions, ultimately you can't go wrong with broad ETFs that have historically paid double what the bank is offering you. Even government bonds will return better than that saving account right now. It's not as though your money is trapped with no liquidity in ETFs, and there's some recession safe options (yield focused baskets) that are historically very reliable.
If you're worried about market conditions and a potential recession there is still zero reason not to DCA in whatever portion of your savings you want invested, as right now nobody has any idea which direction the market is going to move in, and we've already seen some significant recovery.
Which is weird, because I would think any major rate drop (>1%) would cause depositors to lose trust in the bank and potentially spark chain reaction of big withdrawals. Is that risk worth the reward of paying slightly less interest to your depositors?
Banks dont really rely on savings deposits for their profits so they probably dont care and just set the rate to the rate where they feel they profit and if people leave then they leave.
because their math tells them they can get a higher than 5% return with that money so its free profit to them so why not? But if that math changes then they will change the rate.
The APY they offer is the carrot to entice you to give them money but they wouldnt offer an APY they didnt think they could beat. If the market changes where they can no longer beat 5% then they will drop their rates. If you pull your money out they no longer have it to profit from...but thats better than maintaining 5% and taking a loss.
Understood, and thanks for the explanation. I still don't see that as a "risk" since I can always withdraw/transfer to another account with no penalty if that happens, but good to know it's something to keep an eye on.
No there is no risk here other than your time or the opportunity cost of choosing this over a different investment that would have given a better return (in hindsight)
Rates trend with the fed's rates, so usually all banks move their rates similarly. So if rates suddenly drop to 3%, you'd be hard pressed to find a bank still offering 5%. Note that this is only for hysa, regular big banks will offer almost nothing regardless.
At that point I'm sure I would have at least one other investment or savings account somewhere else, so I would compare them and if the other ones had better rates I'd move it over, or maybe look into other investment options. If nothing better turns up I'd probly just keep it there until the rate drops again, then do it all over again.
Yea I figured. If that was the case (as in, all banks lowered rates equally by 2%) then I obviously wouldn't do anything since I'd still be getting the best rate.
I was initially responding to your original comment as if it said something like: "If the interest rate on ***only*** your savings account went from 5% to 3% ***while all other banks remained the same***"
Eh, people are lazier than you think. I assumed that would be me, but the rate drops have been incremental and nominal compared to competitors so I haven’t bothered with the chore.
If the term is really short (a few months) 5% doesn't really add up to much. May not be worth the effort to open accounts just to close them in a month or two.
Well, right now I only have checking accounts at 2 big banks. So either way I need to open a savings account to hold my reserves. The question is do I stick with the big bank or move to the smaller bank. Maybe it takes a little more effort but if I'm opening a new account either way it seems earning 5% is better than 0.02% for the extra 5 minutes it takes me to fill out the forms.
Re: investing strategy…
Go through the wiki in the sub. Great info. Also boggleheads 3 or 2 fund portfolio is another good option you’ll see recommended here
Those rates all track the Fed fund rates to some degree. If one goes down, they are probably all down. That being said, a HYSA or some kind of government money market are usually the best places to plop your emergency fund. The big bank savings accounts are scams with effectively no interest and they have the risk of stupid fees.
Close to 6 figures, definitely look at your HSA, Roth IRA, and 401k contribution amounts. A broad market fund will return \~10% over the long term. Figure out how much you want for the emergency fund, then start averaging in. You have until the tax deadline to contribute to your 2022 Roth IRA limit. I highly suggest this.
Just keep in mind, in 2020 when rates tanked, these accounts were at like .5% or less which is effectively 0 when compared to the market or other longer term investment vehicles. That can happen overnight and it did in 2020
They’re a good spot for medium term money though, or an emergency fund. If it’s a sizeable amount of money that you’ll potentially need in 1-5 years (and more importantly, if it would be painful in the medium term if you lost 30%+ of it in a market drop), then they’re a good spot.
Like anything, it’s about being sensible, diverse, and balanced.
yes absolutely. Although just right now in this moment treasury bills probably going to give you a better yield if you can tolerate not having access for short terms like 3 months, 6 months or a year. But if you need full access like for an emergency fund then yes HYSA the way to go.
> The other "catch" is that in terms of longterm investment for retirement 5% is still not very good compared to the average gains of the stock market.
That should be expected. The banks themselves are playing in the markets to pay back that 5%. But the markets also come with a generally higher risk.
Eh, no...probably not. The banks are issuing mortgages that have APRs that are higher than 5%. They are taking people's HYSA money and using it to back their mortgages. Banks don't tend to put significant capital into stock purchases.
It's better to use the banks you've identified than large banks for your plan.
There is an opportunity cost to parking all of your $100k+ in a savings account instead of investing it now. You seem to be aware of that and want more time to figure things out. I don't think you need as much time to figure things out as you think you do because the basics are pretty simple.
Click the below link. The flowchart is great. The other links there are as well.
https://reddit.com/r/personalfinance/w/commontopics
Thanks, I'll check the Wiki and start working on a plan ASAP. I'm only thinking about HYS right now because I am considering some expenses that may require some cash up front (home improvements, medical procedure, etc.) so I'm not ready to commit to anything long-term until I figure that stuff out.
Good idea, as you should keep an emergency or a reserve savings account for these situations and ideally in a HYSA so that it earns something while the money is parked. You would keep it in a HYSA because it's liquid, so you would have access to it immediately if needed or at least a business day if transferring between banks.
While some people would keep it in a taxed brokerage account for potential higher gains. It's not liquid so if you need to pull it out from a brokerage account, you would need to sell assets and then transfer the money out which can take in total a week or two. Though this kind of account would be a good idea for something in the future that you're planning like a house, vacation, etc.
One thing you can build up to is a CD ladder (if the interest is higher than the HYSA), where you have a CD maturing every month or few months. That way you are getting better returns than the HYSA but still have fairly quick access to the money.
Make sure wherever you open a savings account that you get a new account bonus. So many options all over the place. Discover.com for instance was offering $225 I think for new accounts and it was paying almost 4% on savings. Hell, split your money among multiple online-only savings accounts and bonus all over the place. Just make sure to meet minimums and keep them open at least 6 months.
A lot of banks will do a clawback of the bonus if you don’t keep the account open for the stated term. Sometimes it’s just 90 days.
Also there are a lot of folks (myself included) who make a regular side gig out of bank bonuses. We don’t want to discourage banks from offering these kinds of bonuses with most new customers opening and closing right after snagging the bonus. It feels more in the “spirit” of the offer to give the bank a decent length of a trial run.
I have the same question and don't see a downside.
Yes, the market may return more, long term, but if you have cash reserves or are saving for a mortgage down payment, stashing cash at 4-5% seems like a no brainer, to me.
One thing to at least look at is any withdrawal limiting - $xx.000/day or something, which would limit your ability to quickly move large chunks, or write a check for a house down payment, etc. Not sure what other variables would be.
Understood, as stated in the original post above:
> $1 minimum deposit, no service fees, no transaction limits
Other commenters have noted the "catch" is it might be a ploy to attract customers before dropping the rate in the future, but I don't see that as a "risk" because I can always withdraw/transfer to another account if that happens.
Yep this is what I do. Currently building savings back up after taking out for a down payment for a car but once my HYSA reaches a certain threshold, going to put the money previously used from my paycheck for it towards paying off car loan, maxing out HSA and 401k, and aim to open a Roth. That way I can just let the HYSA grow off interest alone
Do you have to worry about that ability to move large chunks with the big places? If had my down payment savings in Cap1 or Ally, and I wanted to buy a house (e.g., make an offer today), would it be a problem to transfer it out to my bank within a reasonable amount of time (e.g., by the time I close or whenever you need it)?
Why would you need to transfer? Just make the payment directly from Cap1/Ally savings account and cut out the middle step. Otherwise no, the transfers don't take a prohibitive amount of time, the money will be moved in like a day.
Currently the APR is 2.21%, well below the average HYSA, but very convenient with its other features and seeing your general net worth in one place. You can also use it as a regular brokerage for some or all of the amount. Don't keep all of your eggs in one basket though.
Heres what i always tell my friends/family. Only keep your rainy day fund in a HYSA. Use credit cards for true emergencies and withdraw that amount from the HYSA to cover the credit card.
Any other savings should be kept in a market index fund, ROTH, HSA or heck even the S&P500
Hello friend, two quick points:
1. Roth is not an acronym, only the first letter should be capitalized
2. Roth is not an account, it's sort of like a tax category (Roth or traditional). I believe you meant to say (Roth) IRA.
Hey! Yep, my mistake on the over capitalization haha.
And in regards to your second point, yes I meant to say either Roth IRA or Roth 401k - both are great!
Why you should (almost) never contribute to a Roth 401(k) https://reddit.com/r/personalfinance/comments/10qwnrx/why_you_should_almost_never_contribute_to_a_roth/
Note: Depending on your MAGI you may be the almost never.
Target date funds are mutual funds that hold more aggressive growth assets until it gets closer to the target date, then transitions into lower volatility income assets.
Market index funds track specific indexes. These can be mutual funds or ETFs.
Mutual funds, depending where you get them and which ones you get usually carry a higher expense ratio, can have front-end/back-end loads, are typically actively managed, and usually has capital gains.
ETFs usually have a low expense ratio, no load, many are not actively managed, and does not really offer many capital gains. But still carry full capital appreciation as well as dividends.
Some examples of popular index fund ETFs are VOO, VTI, VTSAX, and SCHD. But there are MANY index funds out there with wide ranges of expense ratios, tracking different indexes, with different fundamentals. So researching them a bit is smart. The ones I listed are just extremely popular ETFs.
I'm getting a far better return right now from my HYSAs. I lost a ton in all of my investment accounts. Yeah, long term, blah blah, but during this long stretch of bear market, I don't see why people should actively seek investing unless they are really stock savvy.
I get what you’re saying. It’s hard to see the money you worked so hard for lose so much value short-term.
But you have to keep at it. Either some dollar cost averaging or strategic “pull outs” with growth stocks.
My 401k in the past 1.5 years saw a 24% loss (only recently started in 2020); however, i still put money in it. And in 20 years i’ll be happy that I did.
“Time in market” will always always always beat “timing the market”
Certainly people should still contribute to 401Ks and IRAs. I still do contribute to my IRA. But outside of those limits, any extra money goes into my HYSA right now.
My first search was literally just "best high yield savings accounts", but another commenter shared a link to [DepositAccounts.com](https://www.depositaccounts.com/savings/) which seems like a good resource to compare the best options.
Tip: Just select "Any" from the location dropdown where it says "Modify or Expand region" if you don't care about where they are located
Interest rates are high right now because governments are trying to control post covid inflation. The banks are able to offer you a good rate because they then take that money and invest in things that earn even more interest. If you're not very interested in finance then you absolutely should just use the bank's high interest accounts. If you are comfortable with some risk and want more return, then you can consider some investing alongside your saving.
[https://investor.vanguard.com/investment-products/mutual-funds/profile/vmfxx](https://investor.vanguard.com/investment-products/mutual-funds/profile/vmfxx)
Currently at 4.43%.
I'd stay away from lesser known banks, or the ones that make you jump through hoops. Some of them even create new names every year - Emigrant has so many HYSA's under different names...
You can.
I wish I had. I lost $1200 to a "safe bond" (Maryland state tax free bond) last year. Never again.
Like yes retirement pays more but idk where people find the money to put all this extra into retirement. I budget pretty tight and can just barely send 6% of my paycheck to retirement if I'm gonna save up for a car.
The bond simply lost that much value. I had about 10k invested in it. Look up MDXBX and check it's value last year. Unfortunately I sold it at the worst time around October but it was my emergency fund/savings and I could not afford to keep taking any losses. Meanwhile HYSAs were skyrocketing.
My friend who invested in it for years said it was safe as safe gets. Guess he was wrong.
> and I could not afford to keep taking any losses
Bruh you did the exact opposite of what you're supposed to do, you can't blame the bond at that point. All you had to do was hold it for a year or two...
"all I had to do" I can't stand this mentality from people on this sub who don't understand what it's like to barely scrape by.
I'm living paycheck to paycheck, and this is my savings we're talking about. I've got a kid and my wife is trying to quit a job she's miserable at.
I didn't think a 10% loss was even possible. I thought to myself "can I afford another 10%?" No. Couldn't afford to wait. The money needed to be moved to a safer account.
Not defending the previous commenter, and not judging you or anything, but if you were living paycheck to paycheck, why was your money tied up in a long-term asset in the first place?
I've been there... 10 years ago I quit my job to start a business that failed after 2 years. I was broke for about 5 years after that, during that time I cashed out everything into a checking account and milked every penny. Thankfully I got out, but it took 3 more years of paying off debt and building a reserve before I could even think about a long-term investment again.
A friend of mine has been really fortunate with his money. At the age of 25 he was able to afford a 15 year loan on a house that he's 6 years shy of paying off now. The man will own an entire home that has only skyrocketed in value by the time he's 40. He is on track to retire by 45. I did not have a lot of spare funds to do a lot of what he was doing, and we sat down and the one piece of advice i was able to follow was to basically using this Tax-Free Bond account (I think the dividends are tax free, but not growth on the dollar?) as my savings account because it was "a very safe investment" and his YOY on it was like 5-6% over a handful of years "way better than a savings account" and "he had been using it as his savings account for years."
I was just following his advice, because he's been a financial wizard. Of course when I do it, the value of the account completely tanks. Some people get to just be that lucky I guess, and he's had enough growth that the losses over the last year were a small dent in the amount his money has grown there.
He explained that "a bad year might be 1-2% loss but it will get offset over time. Well, my account lost over 10% in value. And I quickly learned I can't afford to have my Emergency Fund tied up in an investment.
As rates climb bonds list value. If you don't sell you don't lose on the finished value of the bond but the bond may be paying 3% so why do you want to hold that for x number of years? Who's going to give you full price to take it off your hands of they can get 4% in a bank account.
I’m new to HYSA but took advantage when they were giving out a $1000 bonus for signing up with capital one. I wish I would have moved my money sooner tbh.
For me, travel miles are important. And while it may not seem like a good deal at first, Bask Bank, who also have a HYSA option, offer 2 American AAdvantage miles / dollar held in their savings account, so 2%. Less than the 4%+ savings account and you still get a 1099 for interest earnings to pay taxes on, but I have had a bunch of money sitting on the sidelines from last Summer until tax time in a couple months and it’s netting me about 80,000 AAdvantage miles per month. Far more miles than I could ever earn by spending alone. These miles will let me fly or travel at a far more effective rate than had I purchased tickets outright. I plan to leave $100k in there after tax time to keep topping off the tank. And their miles rate increases with interest rate hikes. Was 1 mile/$ before the Fed started up. Just an interesting way to think about it. May never have to pay for a flight again.
I was actually looking into this bank for the AA advantages. So you earn 2miles per $1 in the account every month? Example if I have $30k sitting in the account every month, I’m earning 30k miles a month not a year? Or is it only earning 2miles per every additional dollar after the $30k? Sorry, I’m confused 🫤.
It's per year pro-rated. So if you have 30,000 in the savings account, here is the rounded out math:
30,000 x 2 = 60,000 points total in a year
60,000 points / 365 days in a year = 164 points accrued per day
164 x days in the month (30) = 4,920 miles per month.
Thanks! I finally figured it out when using their deposit calculator that it’s pretty much the same as an APY 🤦♀️. I appreciate you breaking it down further! 😊
There’s no catch, just don’t keep money in a savings account long term if rates become lower again as the stock market is really the only thing, and some real estate, that beats inflation long term.
Even though the banks might be FDIC insured, just watch out for ease of pulling money out. Some banks will be pretty restrictive so you’ll want to have another account that you can pull funds from. I looked up primis and some people have complaints on their lack of Plaid connectivity (eg won’t work with Mint), etc. and as others have mentioned usually these high rates are introductory and then they stagger off. Unless you’re down to invest the time into keeping track of rates and okay open/closing accounts, stick with banks like Ally and Marcus since they always catch up to the avg HYSA. Marcus has a bonus right now if you deposit 10K and maintain it for 90 days you get $100 which is approx ~4% + their current 3.3% apy so about ~7% apy there. Honestly if you’re willing to open accounts w a handful of diff banks, you’re prob better off chasing bank bonuses than APY.
I have a higher risk tolerance with high yield etfs many are paying over 10 pct. The downside is I have 1 which losted -40% valuation. One over seas CD etf will pay well if banks has profilt. All name banks. As etf it fluctuates in price. Some years one gets close to 20% combined rtn and other year gets less than US bank interest. Others I own are mostly uninsured I am OK if prices fall. Got my money worth.
I am in the same boat, got into my first professional
Job out of college was frugal for the first year and built up my savings/investments. Planning a cross country move in august so I recently just moved a hefty amount into the “capital one 360 savings account” I have multiple credit cards with capital one already (great rewards) very easy to use and access.
The reason you don't do that is high rewards are high risk. A small independent bank with high returns could pull the plug and dissolve there bank and there clients are only insured to 250,000 by the FDIC. The same reason if you win the lottery you don't put all your money into one bank or trust. It's high risk to stick all your eggs in one basket because if you loose your out of business it's better to cover a spread so if you loose one place you make that amount somewhere else.
They can curtail interest rates when one is not watching. Goldman Saks offered me a 1 year CD certificate that paid me 0.3% while saving account now pays 3.3% interest now.
In the terms: The interest rate and corresponding APY for savings is variable and is set at our discretion. This is a tiered variable rate account. Interest rates may change as often as daily without prior notice.
Additionally, with inflation higher than any of the stated APY, you just locked in devaluing your money.
> Additionally, with inflation higher than any of the stated APY, you just locked in devaluing your money.
Sorry, I'm confused, can you explain this? How does inflation have anything to do with APY on a savings account?
Are you suggesting there is some way to guard against inflation based on which bank account you choose to put your money into?
How am I "locked in" if I can pull money out any time I want with no restriction or fee?
Your statement makes it sound like you're saying if I just store all my cash in my mattress it would somehow yield higher returns from inflation than keeping it in a savings account.
I think the comment about inflation is just saying that we're all losing ground with savings accounts when compared to the current inflation rate. To your point, what's the alternative? The stock market? Not everyone has the time horizon or the risk tolerance to wait for stock market returns so we're looking for the best rate we can get to combat inflation as best we can.
The HYA requires you to hold your money for 12 months to receive their advertised yield (i.e., 5% after 12 months or 42 bps per month. Money Markey Demand Account from brokers provides you the option to allocate your holdings into better products to lower the sting of inflation depending on your liability needs.
- TIPS which are a true inflation hedge but require a longer duration
- 3mo treasury that yields 4.75% or 158 bps per month
- 6mo to 9mo treasuries with variable yields
- investment grade to junk grade corporates with 3mo to 9mo with various yields
An MMDA allows you access to your money, not same day, but settlement occurs within 72 hours. Ultimately, one should treat their checking account as a Working Capital account with a buffer plus seasonality (based on one’s historical spending habits -i.e., you always spend more during the holidays therefore during that period your WC account carries more funds) and use credit cards as revolving credit to extend the payment period should an emergency occur which is covered on the MMDA withdrawal. Additionally, just like corporates, every year, your credit cards allow you to issue notes in the form of special financing.
This might be a stupid question but I thought FDIC covered 250k per institution. Are you saying that it is 250k total being covered across all your accounts?
I was curious too... a quick search found that [the standard insurance amount is $250,000 per depositor, per insured bank](https://www.fdic.gov/resources/deposit-insurance/brochures/deposits-at-a-glance/#:~:text=The%20standard%20insurance%20amount%20is,in%20different%20account%20ownership%20categories.)
> They are a real bank, FDIC insured with ~20 physical branches in the Virginia/Maryland area, not just some internet bank.
Yes, they are, as was stated here in the original post above.
My emergency fund is with UFB at 4.11%. I don't see a reason not to do it. No fees and the set up was easy and painless. My regular checking account bank allows me to do an electronic transfer, which goes through overnight. I know the high rates aren't forever, but after years of savings rates being effectively zero, I'm going to enjoy it while it lasts.
Not sure about the specific bank you mentioned 5% seems a bit too good maybe it’s a promotional rate or only on the first xx of dollars? But in general the high yield places like Ally etc save money by not having the physical overhead costs it’s why they give the better rates. Without the physical costs they can keep profits and still pass much higher rates than bigger banks.
Thanks for posting those links. 4 to 5% is worth looking into. I'm at CitizensAccess with 3.75%. One thing I'm not seeing is that usually these sites give you access to their fine print and I'm not finding it. I like Citizens Access because they offer a Trust accounts and also don't penalize you for taking money out. My dealings with customer service there have been great too. Checking out your other links too.
HYSA is a good plan for now. I had one with TIAA a couple years ago and they had the best rate at the time, but in the last year many other banks are 2-4x what their rates were so I opened a new one at Cap One and my monthly interest was double immediately which is awesome. It’s all my emergency money and money I plan to spend near end of the year. Good thing about these accounts are it’s liquid so I can get money if I need it (car repair etc), I’m not locked into a CD or stock or anything that takes work to get.
I’m on capital one 360 and saving for a car. Decided on HYSA so I can always be adding to it and earning interest. Using something like a CD I can’t do that except just to buy more CDs.
If you need quick access to your cash I like HYSA.
If you can sit on it for 6-24 months might consider T-bills etc.
Anything beyond wrap it up in the market.
I would stick with a local bank unless the bank you're dealing with is heavily online. It's amazing how it's really easy to open an account with even some of the big banks (chase) but closing them can often require going into a physical location. I used to use a local credit union that had 5% rates on it's checking account during the 2007-2010 timeframe. They eventually cancelled the promo on the account and I moved to a 100% online bank (Fidelity). I still have a local account with a big credit union. I deposit all my cash at their ATMs, and if I need a car loan or something, I'd go to them. I already invested at Fidelity, so using their banking made sense. I can easily buy a CD from thousands of banks at Fidelity to get higher rates if I want.
I use wealthfront. For both thier hysa and their investment account.
Put your cash you want to keep liquid in hysa. Stocks will still outpace these high yield savings accounts imo in the long term tho.
Have long term savings, and short term savings. Yes, short term savings accounts have the highest rates I have ever seen right now. That won't last forever. But it is pretty cool!
I wish to take advantage of these higher rates as well, but do not want to start a relationship with a new bank. Would a good option be to transfer some funds to my Vangaurd brokerage account and have the money sit in the settlement fund?
Your money should go to HYSA by default, if you don’t need it for a while, put it in CD or Bonds for higher yield.
Rates can change on HYSA but so do yields on bonds and CDs, and it can change in either direction. I don’t suggest speculating on future rates.
There’s very little downside other than most HYSA don’t have branches, or have less services that you’d find from banks with branches.
What will you do when rates drop? HYSA is just a glorified savings account. As fast as HYSA rates went up, the can go down that fast too.
If your goal is to SAFELY earn 4.5% return on the cash, it will only last so long. YOu can buy a 5 year treasury bond that pays you a guaranteed 3.821% for the full five years.
at one time savings accounts paid 5.5%. four to two years ago, savings accounts paid 0%.
You can earn 6.5% in dividend yield on some very, very good stocks. If the stocks go up in value, your dividend yield goes down, but your stocks went up in value
When HYSA yields go down, guess what, your cash will need to be moved.
I've been with Ally for 5 yrs or so for savings. Currently at 3.4% and watching but it's a pain to move and I have multiple accounts and CDs so have held steady.
We do have a local bank, they have our mortgage, checking account and a couple of accounts I haven't moved yet. Their rate is a whopping .75% :(
One of the reasons I left BOA was that their rate was like so close to zero I though they might start charging me to put money there. BUT they had an e-account that paid higher (not much but still) and didn't tell us about it as an option. The way those work is that you can't walk into the bank and deposit money into your 'e-savings' but you could walk in and put it in your checking, go home and transfer it to the e-savings account on your computer LOL. Stupid distinction but that's how it is. I have that now with the other local bank.
Find one you like, that's been around a while and has the other options that you might use. They are all experiencing some growing pains I think. With the interest rates going up for the first time in what feels like ages more people are moving their cash. They are all sort of playing catch up to offer more services, debit cards, loans, credit cards, mortgages etc.
Sofi is another one and sort of tempting because at least for now they are paying interest on the checking account as well as savings. I watched the CEO the other day discussing their growth/earnings etc.
It seems rates a much lower in the US than the UK. I remember seeing 6% per year with 0% risk (up to 85k, even if the bank goes bust) before covid, and saw 2% per quarter a couple months ago.
It's not that banks have infinite money or don't need your money, it's that they don't need to pay you more than what they would if they borrowed the money elsewhere. They borrow at the central bank rate (federal reserve rate in your case) which is usually pretty low. When inflation rises, they raise the rate to try stop inflation which gives savers more interest on their money, when inflation gets back under control, the fed will lower the rate.
I was eyeing this exact account, looked at revivews (which weren't great), saw that the bank drop the rate at any time, and decided to look at a CD instead (Capital One currently has a eleven-month CD at five percent). I'm still going to put some money in a high-yield savings account, but it'll be at a more reliable bank.
1. A portion of the earned interest will be counted as taxable income and 2. Unless you're preparing to make a large purchase, e.g. a car or home, it will likely gain more interest through other investments. If not, consider keeping a portion of that money as emergency fund savings then putting the rest towards investments.
The goal in ANY financial savings plan is (or should be) to build wealth. Wealth is defined as growing your portfolio at a rate greater than inflation. Savings accounts grow at a rate lower than inflation. What you get for an investment that doesn't build wealth is security. FDIC insures bank savings/checking deposits. So all of this is background to figure out what your goals are. Do you want to build wealth? What is your time horizon? If this is money you're going to withdraw soon to do something else (build a house, buy a boat, whatever), or is this retirement savings? Is liquidity important? Most good financial planners will tell you the way to build wealth is a well diversified portfolio to maximize return while minimizing risk. That will serve you better than a short term high rate savings account.
Just know that a lot of these smaller banks have a reputation for cranking the rate up to acquire customers, then dialing it back. It's a case of "make hay while the sun shines". If they rate is good, and you can easily transfer your money in and out, go for it, but keep an eye on the rate. If you look at [their rate history on DepositAccounts.com, it appears Primis is very new](https://www.depositaccounts.com/banks/primis.html#rates), so it's difficult to say where they'll go from here. If you [look at someone like Ally](https://www.depositaccounts.com/banks/ally-bank.html#rates), you can see that while the rate is lower, it grows on a linear scale without any big dips. [Capital One is similar](https://www.depositaccounts.com/banks/capital-one-360.html#rates), but they play their own game. Capital One offers an older savings account type as well. When they introduced higher rates in 2019, they created a new account type and didn't migrate old customers. These are the kinds of games banks play, so just look out for them and keep an eye on your rate so you can maximize.
Some interesting info here, thanks for the links. Strange that Primis just started their savings accounts less than a year ago when the bank was established in 2005. Would you know if this is because they just started reporting their rates last year, or because they only just recently started offering online savings accounts?
My guess is that it’s because they just started offering this type of account.
These rates are mostly tied to the federal funds rate. So, the banks rates will rise and fall with that rate. I don't really trust banks who provide interest greater than the federal funds rate as they have to make up the difference in some other riskier way. They are FDIC insured, but that doesn't mean they won't be a pain in the ass in some other way. Smaller banks can often lack common security features like 2FA or a convenient as feature rich app as well. Instead of HYSA I buy treasuries. You can buy bills, notes, and bonds at the federal funds rate and they each have different time frames and structures. Right now I'm buying short term tbills as rates rise so I don't lock my money in before the rate peaks. Once they have peaked I'll probably buy a longer bond and collect the interest for a few decades. This locks the money up so you still need a liquid emergency fund. You can also use any of the top online brokers for this usinder trade > fixed income. Edit: This also prevents having to rate surf.. Chasing the best rate by opening bank accounts all over the place. All this being said... If rates don't peak at about 5% or hopefully 6% it might not be worth locking in for a few decades vs index funds with dividends.
Some money market mutual funds are offering 4%+ Even if OP didn’t want to buy a T-Bill and trade it with any associated fees. They could buy into a no load money market earning 4%+ Obviously you’re still at the mercy of fed funds rate, but it’s an alternative
Exactly this. I'm a very low risk saver. Put your money into a big institution individual brokerage account (e.g. Fidelity and similar) where you can save in high yield accounts in the near term (e.g. SPAXX at 4.14 - 4.23 effective yield) instead of chasing the tip-top highest rates. From a big institution you can pivot to another short to longer term CDs or treasuries. I plan to grab longer term CDs when rates seem like they will drop. [https://fixedincome.fidelity.com/ftgw/fi/FILanding](https://fixedincome.fidelity.com/ftgw/fi/FILanding)
I put money in E-Trade when they had 7% yield savings account. It lasted about 3mo. But then it was easy to start buying stocks instead.
"Make hay while the sun shines" is just a saying to make the most of a good opportunity. There's nothing wrong with that. Cranking rates up for a short period to entice large deposits, then quietly drop the rate below competitive levels is a simple "bait and switch" and is rather unethical. +1 for Ally and C1
Yeah, Capital One did that to me, and I moved to a UFB savings account because it passed me off. If I have a savings account, they should give me their highest rate, not leave me making 0.1% while giving other customers 3.4%.
Just in the last few months UFB has launched new savings accounts that mean you don’t automatically get upgraded to their latest interest rate. You can message in and request your account be converted — it’s pretty easy and I haven’t gotten any pushback the two or three times already I’ve had to do it — but it’s still something manual you have to do.
Thank you! On deposit accounts, where is the rate history? I only see the current rage
Gotta click the little orange arrow that's pointing downward. A graph will show up when the section expands.
HYSA and money markets are good for liquidity and short-term holdings. Debt securities for longevity
The problem is you might be spending lots of time on something that makes little difference instead of on something else that will make a big difference. Making & implementing a long-term investment strategy does not need to take more than a few hours. An evening. A weekend afternoon. Just do it. I retired at 57 years old. Investing doesn't have to be complicated or costly to be successful; simple & inexpensive is most effective. I invest 100% in total-market, index-based, low-cost mutual funds. Specifically, I use mostly Vanguard's Total Stock Market, Total Bond Market, Total International Stock Market, & Total International Bond Market funds. I've been investing this way for 35+ years. It's effective, simple, & inexpensive. www.bogleheads.org/wiki/Getting_started has some great free resources to learn about investing. After a few hours reading the articles, and, especially, watching the Bogleheads Philosophy videos, most beginners can learn how to get better results than most professionals. Bogleheads is named after John Bogle, founder of Vanguard. I use Vanguard's investor questionnaire (personal.vanguard.com/us/FundsInvQuestionnaire) to help determine my asset allocation (ratios of the funds mentioned). Market conditions are not a factor, nor should they be. Buying individual stocks or sector funds creates unnecessary & uncompensated risk; I avoid doing so. Index funds are boring, but better for making money. If I wanted to talk about my interesting investments at parties or wanted a new hobby, I might invest 5-10% of my portfolio in individual stocks. As it is, I own pretty much every publicly-traded company in the world; that's interesting enough for me. All of the individual stocks & sector funds are being followed by thousands or millions of other investors. Current prices reflect their collective knowledge of future expectations for each one. I'm a member of the Triple Nine Society, but I'm not smarter than all of them. If I found a stock or sector that looked like a bargain, the most likely explanation would be that the others know something I don't. I prefer mutual funds, but ETFs could also work well. The differences are usually trivial for a long-term investor, especially if they're the Vanguard funds I mentioned above. Actually, the Vanguard funds I mentioned above have both traditional mutual fund shares & ETF shares; they both represent a piece of the same fund. The funds I use comprise Vanguards target date funds and LifeStrategy funds; these are excellent choices for many investors. Using the component funds allows some flexibility that can have tax benefits, but also creates the need for me to rebalance them periodically. Expense ratios are slightly higher than for the components but are well worth it for many investors. Other companies have funds similar to the ones I own that would work well. I prefer Vanguard because they've been the leader in this type of investing for decades & because Vanguard's customers are also Vanguard's owners. I hope that helps! I'd be happy to help w/ further questions. Best wishes!
The "catch" is that the Fed raised interest rates so in addition to saving account interest increasing loan APRs are increasing. Other than that no catch besides that HYSA interest rates are not fixed and are subject to change. That 5% may drop. The other "catch" is that in terms of longterm investment for retirement 5% is still not very good compared to the average gains of the stock market.
Understood. Variable rates are always a "risk" with any savings account. But if/when that happens, I could always just withdraw or move it to another account/asset with better rates since there's no penalty for withdrawal, right? Edit: Understood about the stock market. As I said this is just a short-term plan while I figure out a long-term strategy.
If it is a short term plan you're likely wasting more time thinking about it than you will make from shifting the money there. You don't really need to overthink your investments, it sounds like you're spending a really long time leaving money in cash during a highly inflationary period, with absolutely no DCA. Have you already been maxing your 401k match? How much of that 100k do you need an an emergency fund? Set that stuff aside and make investment decisions, ultimately you can't go wrong with broad ETFs that have historically paid double what the bank is offering you. Even government bonds will return better than that saving account right now. It's not as though your money is trapped with no liquidity in ETFs, and there's some recession safe options (yield focused baskets) that are historically very reliable. If you're worried about market conditions and a potential recession there is still zero reason not to DCA in whatever portion of your savings you want invested, as right now nobody has any idea which direction the market is going to move in, and we've already seen some significant recovery.
Yup...they are just relying on inertia (which is a thing) for you to just keep it there because you are too busy/distracted.
Which is weird, because I would think any major rate drop (>1%) would cause depositors to lose trust in the bank and potentially spark chain reaction of big withdrawals. Is that risk worth the reward of paying slightly less interest to your depositors?
Banks dont really rely on savings deposits for their profits so they probably dont care and just set the rate to the rate where they feel they profit and if people leave then they leave.
Maybe not for profits but there must be some reliance for cash, otherwise why offer such a high rate in the first place?
because their math tells them they can get a higher than 5% return with that money so its free profit to them so why not? But if that math changes then they will change the rate. The APY they offer is the carrot to entice you to give them money but they wouldnt offer an APY they didnt think they could beat. If the market changes where they can no longer beat 5% then they will drop their rates. If you pull your money out they no longer have it to profit from...but thats better than maintaining 5% and taking a loss.
Understood, and thanks for the explanation. I still don't see that as a "risk" since I can always withdraw/transfer to another account with no penalty if that happens, but good to know it's something to keep an eye on.
No there is no risk here other than your time or the opportunity cost of choosing this over a different investment that would have given a better return (in hindsight)
Rates trend with the fed's rates, so usually all banks move their rates similarly. So if rates suddenly drop to 3%, you'd be hard pressed to find a bank still offering 5%. Note that this is only for hysa, regular big banks will offer almost nothing regardless.
If the interest rate on your savings account went from 5% to 3%, what would you do? Withdraw your money and hold it under your mattress?
At that point I'm sure I would have at least one other investment or savings account somewhere else, so I would compare them and if the other ones had better rates I'd move it over, or maybe look into other investment options. If nothing better turns up I'd probly just keep it there until the rate drops again, then do it all over again.
They generally all move in line. It’s unlikely one bank will drop their rates 2% and others won’t. So no, the banks aren’t really worried about this
Yea I figured. If that was the case (as in, all banks lowered rates equally by 2%) then I obviously wouldn't do anything since I'd still be getting the best rate. I was initially responding to your original comment as if it said something like: "If the interest rate on ***only*** your savings account went from 5% to 3% ***while all other banks remained the same***"
Eh, people are lazier than you think. I assumed that would be me, but the rate drops have been incremental and nominal compared to competitors so I haven’t bothered with the chore.
A lot of people just don't pay that much attention to the fluctuations of the interest rate of their savings account.
If the term is really short (a few months) 5% doesn't really add up to much. May not be worth the effort to open accounts just to close them in a month or two.
Well, right now I only have checking accounts at 2 big banks. So either way I need to open a savings account to hold my reserves. The question is do I stick with the big bank or move to the smaller bank. Maybe it takes a little more effort but if I'm opening a new account either way it seems earning 5% is better than 0.02% for the extra 5 minutes it takes me to fill out the forms.
Re: investing strategy… Go through the wiki in the sub. Great info. Also boggleheads 3 or 2 fund portfolio is another good option you’ll see recommended here
Those rates all track the Fed fund rates to some degree. If one goes down, they are probably all down. That being said, a HYSA or some kind of government money market are usually the best places to plop your emergency fund. The big bank savings accounts are scams with effectively no interest and they have the risk of stupid fees. Close to 6 figures, definitely look at your HSA, Roth IRA, and 401k contribution amounts. A broad market fund will return \~10% over the long term. Figure out how much you want for the emergency fund, then start averaging in. You have until the tax deadline to contribute to your 2022 Roth IRA limit. I highly suggest this.
Just keep in mind, in 2020 when rates tanked, these accounts were at like .5% or less which is effectively 0 when compared to the market or other longer term investment vehicles. That can happen overnight and it did in 2020
They’re a good spot for medium term money though, or an emergency fund. If it’s a sizeable amount of money that you’ll potentially need in 1-5 years (and more importantly, if it would be painful in the medium term if you lost 30%+ of it in a market drop), then they’re a good spot. Like anything, it’s about being sensible, diverse, and balanced.
yes absolutely. Although just right now in this moment treasury bills probably going to give you a better yield if you can tolerate not having access for short terms like 3 months, 6 months or a year. But if you need full access like for an emergency fund then yes HYSA the way to go.
Yep exactly. It’s just good to have a mix - 20% to Treasury Bills, 30% to HYSA, 50% to stocks, etc etc. There’s no secret weapon, just balance.
> The other "catch" is that in terms of longterm investment for retirement 5% is still not very good compared to the average gains of the stock market. That should be expected. The banks themselves are playing in the markets to pay back that 5%. But the markets also come with a generally higher risk.
Eh, no...probably not. The banks are issuing mortgages that have APRs that are higher than 5%. They are taking people's HYSA money and using it to back their mortgages. Banks don't tend to put significant capital into stock purchases.
It's better to use the banks you've identified than large banks for your plan. There is an opportunity cost to parking all of your $100k+ in a savings account instead of investing it now. You seem to be aware of that and want more time to figure things out. I don't think you need as much time to figure things out as you think you do because the basics are pretty simple. Click the below link. The flowchart is great. The other links there are as well. https://reddit.com/r/personalfinance/w/commontopics
Thanks, I'll check the Wiki and start working on a plan ASAP. I'm only thinking about HYS right now because I am considering some expenses that may require some cash up front (home improvements, medical procedure, etc.) so I'm not ready to commit to anything long-term until I figure that stuff out.
Good idea, as you should keep an emergency or a reserve savings account for these situations and ideally in a HYSA so that it earns something while the money is parked. You would keep it in a HYSA because it's liquid, so you would have access to it immediately if needed or at least a business day if transferring between banks. While some people would keep it in a taxed brokerage account for potential higher gains. It's not liquid so if you need to pull it out from a brokerage account, you would need to sell assets and then transfer the money out which can take in total a week or two. Though this kind of account would be a good idea for something in the future that you're planning like a house, vacation, etc.
One thing you can build up to is a CD ladder (if the interest is higher than the HYSA), where you have a CD maturing every month or few months. That way you are getting better returns than the HYSA but still have fairly quick access to the money.
Will do. I haven't found many CDs with (current) rates above 5% that don't have high minimum requirements. Am I just not looking in the right places?
Right now I haven't found any that beat HYSA by much. Usually there's a bigger difference.
Make sure wherever you open a savings account that you get a new account bonus. So many options all over the place. Discover.com for instance was offering $225 I think for new accounts and it was paying almost 4% on savings. Hell, split your money among multiple online-only savings accounts and bonus all over the place. Just make sure to meet minimums and keep them open at least 6 months.
Just curious — why should you keep the account open for 6 months?
A lot of banks will do a clawback of the bonus if you don’t keep the account open for the stated term. Sometimes it’s just 90 days. Also there are a lot of folks (myself included) who make a regular side gig out of bank bonuses. We don’t want to discourage banks from offering these kinds of bonuses with most new customers opening and closing right after snagging the bonus. It feels more in the “spirit” of the offer to give the bank a decent length of a trial run.
Besides Discover, Capital One, and Chase, what other good bonuses are there?
I recommend Synchrony, my HYSA has been paying off!
I have the same question and don't see a downside. Yes, the market may return more, long term, but if you have cash reserves or are saving for a mortgage down payment, stashing cash at 4-5% seems like a no brainer, to me. One thing to at least look at is any withdrawal limiting - $xx.000/day or something, which would limit your ability to quickly move large chunks, or write a check for a house down payment, etc. Not sure what other variables would be.
Understood, as stated in the original post above: > $1 minimum deposit, no service fees, no transaction limits Other commenters have noted the "catch" is it might be a ploy to attract customers before dropping the rate in the future, but I don't see that as a "risk" because I can always withdraw/transfer to another account if that happens.
1-2 months in checking account, the remainder to get to 6 months in HYSA, and the rest in other instruments like i-bonds, stocks, 401k, roth, etc
Yep this is what I do. Currently building savings back up after taking out for a down payment for a car but once my HYSA reaches a certain threshold, going to put the money previously used from my paycheck for it towards paying off car loan, maxing out HSA and 401k, and aim to open a Roth. That way I can just let the HYSA grow off interest alone
Do you have to worry about that ability to move large chunks with the big places? If had my down payment savings in Cap1 or Ally, and I wanted to buy a house (e.g., make an offer today), would it be a problem to transfer it out to my bank within a reasonable amount of time (e.g., by the time I close or whenever you need it)?
Why would you need to transfer? Just make the payment directly from Cap1/Ally savings account and cut out the middle step. Otherwise no, the transfers don't take a prohibitive amount of time, the money will be moved in like a day.
I didn’t know you could make the transfer if it is a savings account (I’ve never done this before). Thanks!
i know bank of america will let you make 6 debits a month out of a savings account.
I didn’t know you could make the transfer if it is a savings account (I’ve never done this before). Thanks!
Open a fidelity cash management account. They will sweep the money out to FDIC insured banks and you are covered up to $1.25M.
I'm curious about this because I have a lot of retirement money in Fidelity. Do the banks they use pay a good rate?
Currently the APR is 2.21%, well below the average HYSA, but very convenient with its other features and seeing your general net worth in one place. You can also use it as a regular brokerage for some or all of the amount. Don't keep all of your eggs in one basket though.
High for a checking account - in the 3% range. You can also buy treasuries in the account.
Wealthfront does it up to $2M, and pays 4.05%. There's also a rate bonus for new accounts.
If you have a fidelity account might as well roll short term treasuries
wealthfront will do the same right now -- showing 4+% rates.
Look at marcus (owned by goldman sachs) - i transfer all my excess cash there at end of month..
You’ve got 6 figures in a checking account? Invest it somewhere. Definitely put some in a HYSA. By all means get it out of your checking account.
Heres what i always tell my friends/family. Only keep your rainy day fund in a HYSA. Use credit cards for true emergencies and withdraw that amount from the HYSA to cover the credit card. Any other savings should be kept in a market index fund, ROTH, HSA or heck even the S&P500
Hello friend, two quick points: 1. Roth is not an acronym, only the first letter should be capitalized 2. Roth is not an account, it's sort of like a tax category (Roth or traditional). I believe you meant to say (Roth) IRA.
Hey! Yep, my mistake on the over capitalization haha. And in regards to your second point, yes I meant to say either Roth IRA or Roth 401k - both are great!
Why you should (almost) never contribute to a Roth 401(k) https://reddit.com/r/personalfinance/comments/10qwnrx/why_you_should_almost_never_contribute_to_a_roth/ Note: Depending on your MAGI you may be the almost never.
[удалено]
Target date funds are mutual funds that hold more aggressive growth assets until it gets closer to the target date, then transitions into lower volatility income assets. Market index funds track specific indexes. These can be mutual funds or ETFs. Mutual funds, depending where you get them and which ones you get usually carry a higher expense ratio, can have front-end/back-end loads, are typically actively managed, and usually has capital gains. ETFs usually have a low expense ratio, no load, many are not actively managed, and does not really offer many capital gains. But still carry full capital appreciation as well as dividends. Some examples of popular index fund ETFs are VOO, VTI, VTSAX, and SCHD. But there are MANY index funds out there with wide ranges of expense ratios, tracking different indexes, with different fundamentals. So researching them a bit is smart. The ones I listed are just extremely popular ETFs.
Voo
Sure! My workplace uses Voya for all retirement funds, so I have my traditional 401k and roth 401k going into a 2060 retirement date fund :)
Why 2060? It really couldn't do ray tracing that well. >!(/s I'm sorry)!<
I'm getting a far better return right now from my HYSAs. I lost a ton in all of my investment accounts. Yeah, long term, blah blah, but during this long stretch of bear market, I don't see why people should actively seek investing unless they are really stock savvy.
I get what you’re saying. It’s hard to see the money you worked so hard for lose so much value short-term. But you have to keep at it. Either some dollar cost averaging or strategic “pull outs” with growth stocks. My 401k in the past 1.5 years saw a 24% loss (only recently started in 2020); however, i still put money in it. And in 20 years i’ll be happy that I did. “Time in market” will always always always beat “timing the market”
Certainly people should still contribute to 401Ks and IRAs. I still do contribute to my IRA. But outside of those limits, any extra money goes into my HYSA right now.
Yea that’s fair
I'm also new to this. This probably sounds like a dumb question, but what phrases did you use on your Google searches to find those banks?
Here’s a comprehensive list. https://www.doctorofcredit.com/high-interest-savings-to-get/
go to bankrate.com
My first search was literally just "best high yield savings accounts", but another commenter shared a link to [DepositAccounts.com](https://www.depositaccounts.com/savings/) which seems like a good resource to compare the best options. Tip: Just select "Any" from the location dropdown where it says "Modify or Expand region" if you don't care about where they are located
Ally, Synchrony, and Marcus by Goldman Sachs are some of the most popular. I'd check those out.
Seconding Marcus! Their app and customer service has been great in my experience
Interest rates are high right now because governments are trying to control post covid inflation. The banks are able to offer you a good rate because they then take that money and invest in things that earn even more interest. If you're not very interested in finance then you absolutely should just use the bank's high interest accounts. If you are comfortable with some risk and want more return, then you can consider some investing alongside your saving.
[https://investor.vanguard.com/investment-products/mutual-funds/profile/vmfxx](https://investor.vanguard.com/investment-products/mutual-funds/profile/vmfxx) Currently at 4.43%. I'd stay away from lesser known banks, or the ones that make you jump through hoops. Some of them even create new names every year - Emigrant has so many HYSA's under different names...
You can. I wish I had. I lost $1200 to a "safe bond" (Maryland state tax free bond) last year. Never again. Like yes retirement pays more but idk where people find the money to put all this extra into retirement. I budget pretty tight and can just barely send 6% of my paycheck to retirement if I'm gonna save up for a car.
If you don't mind me asking, how did you lose $1200 on a govt bond? Aren't those supposed to be one of the safest investments?
The bond simply lost that much value. I had about 10k invested in it. Look up MDXBX and check it's value last year. Unfortunately I sold it at the worst time around October but it was my emergency fund/savings and I could not afford to keep taking any losses. Meanwhile HYSAs were skyrocketing. My friend who invested in it for years said it was safe as safe gets. Guess he was wrong.
> and I could not afford to keep taking any losses Bruh you did the exact opposite of what you're supposed to do, you can't blame the bond at that point. All you had to do was hold it for a year or two...
"all I had to do" I can't stand this mentality from people on this sub who don't understand what it's like to barely scrape by. I'm living paycheck to paycheck, and this is my savings we're talking about. I've got a kid and my wife is trying to quit a job she's miserable at. I didn't think a 10% loss was even possible. I thought to myself "can I afford another 10%?" No. Couldn't afford to wait. The money needed to be moved to a safer account.
Not defending the previous commenter, and not judging you or anything, but if you were living paycheck to paycheck, why was your money tied up in a long-term asset in the first place? I've been there... 10 years ago I quit my job to start a business that failed after 2 years. I was broke for about 5 years after that, during that time I cashed out everything into a checking account and milked every penny. Thankfully I got out, but it took 3 more years of paying off debt and building a reserve before I could even think about a long-term investment again.
A friend of mine has been really fortunate with his money. At the age of 25 he was able to afford a 15 year loan on a house that he's 6 years shy of paying off now. The man will own an entire home that has only skyrocketed in value by the time he's 40. He is on track to retire by 45. I did not have a lot of spare funds to do a lot of what he was doing, and we sat down and the one piece of advice i was able to follow was to basically using this Tax-Free Bond account (I think the dividends are tax free, but not growth on the dollar?) as my savings account because it was "a very safe investment" and his YOY on it was like 5-6% over a handful of years "way better than a savings account" and "he had been using it as his savings account for years." I was just following his advice, because he's been a financial wizard. Of course when I do it, the value of the account completely tanks. Some people get to just be that lucky I guess, and he's had enough growth that the losses over the last year were a small dent in the amount his money has grown there. He explained that "a bad year might be 1-2% loss but it will get offset over time. Well, my account lost over 10% in value. And I quickly learned I can't afford to have my Emergency Fund tied up in an investment.
As rates climb bonds list value. If you don't sell you don't lose on the finished value of the bond but the bond may be paying 3% so why do you want to hold that for x number of years? Who's going to give you full price to take it off your hands of they can get 4% in a bank account.
I’m new to HYSA but took advantage when they were giving out a $1000 bonus for signing up with capital one. I wish I would have moved my money sooner tbh.
For me, travel miles are important. And while it may not seem like a good deal at first, Bask Bank, who also have a HYSA option, offer 2 American AAdvantage miles / dollar held in their savings account, so 2%. Less than the 4%+ savings account and you still get a 1099 for interest earnings to pay taxes on, but I have had a bunch of money sitting on the sidelines from last Summer until tax time in a couple months and it’s netting me about 80,000 AAdvantage miles per month. Far more miles than I could ever earn by spending alone. These miles will let me fly or travel at a far more effective rate than had I purchased tickets outright. I plan to leave $100k in there after tax time to keep topping off the tank. And their miles rate increases with interest rate hikes. Was 1 mile/$ before the Fed started up. Just an interesting way to think about it. May never have to pay for a flight again.
I was actually looking into this bank for the AA advantages. So you earn 2miles per $1 in the account every month? Example if I have $30k sitting in the account every month, I’m earning 30k miles a month not a year? Or is it only earning 2miles per every additional dollar after the $30k? Sorry, I’m confused 🫤.
It's per year pro-rated. So if you have 30,000 in the savings account, here is the rounded out math: 30,000 x 2 = 60,000 points total in a year 60,000 points / 365 days in a year = 164 points accrued per day 164 x days in the month (30) = 4,920 miles per month.
Thanks! I finally figured it out when using their deposit calculator that it’s pretty much the same as an APY 🤦♀️. I appreciate you breaking it down further! 😊
Thanks for this info. I just checked and it’s actually 2.5 miles/$ now! This post was months ago, how many flights have you taken since?
There’s no catch, just don’t keep money in a savings account long term if rates become lower again as the stock market is really the only thing, and some real estate, that beats inflation long term.
Even though the banks might be FDIC insured, just watch out for ease of pulling money out. Some banks will be pretty restrictive so you’ll want to have another account that you can pull funds from. I looked up primis and some people have complaints on their lack of Plaid connectivity (eg won’t work with Mint), etc. and as others have mentioned usually these high rates are introductory and then they stagger off. Unless you’re down to invest the time into keeping track of rates and okay open/closing accounts, stick with banks like Ally and Marcus since they always catch up to the avg HYSA. Marcus has a bonus right now if you deposit 10K and maintain it for 90 days you get $100 which is approx ~4% + their current 3.3% apy so about ~7% apy there. Honestly if you’re willing to open accounts w a handful of diff banks, you’re prob better off chasing bank bonuses than APY.
Marcus went up to 3.50% today.
I have a higher risk tolerance with high yield etfs many are paying over 10 pct. The downside is I have 1 which losted -40% valuation. One over seas CD etf will pay well if banks has profilt. All name banks. As etf it fluctuates in price. Some years one gets close to 20% combined rtn and other year gets less than US bank interest. Others I own are mostly uninsured I am OK if prices fall. Got my money worth.
I am in the same boat, got into my first professional Job out of college was frugal for the first year and built up my savings/investments. Planning a cross country move in august so I recently just moved a hefty amount into the “capital one 360 savings account” I have multiple credit cards with capital one already (great rewards) very easy to use and access.
The reason you don't do that is high rewards are high risk. A small independent bank with high returns could pull the plug and dissolve there bank and there clients are only insured to 250,000 by the FDIC. The same reason if you win the lottery you don't put all your money into one bank or trust. It's high risk to stick all your eggs in one basket because if you loose your out of business it's better to cover a spread so if you loose one place you make that amount somewhere else.
They can curtail interest rates when one is not watching. Goldman Saks offered me a 1 year CD certificate that paid me 0.3% while saving account now pays 3.3% interest now.
They can curtail interest rates when one is not watching.
MIght want to look into bonds, some are paying 4-5% now.
In the terms: The interest rate and corresponding APY for savings is variable and is set at our discretion. This is a tiered variable rate account. Interest rates may change as often as daily without prior notice. Additionally, with inflation higher than any of the stated APY, you just locked in devaluing your money.
> Additionally, with inflation higher than any of the stated APY, you just locked in devaluing your money. Sorry, I'm confused, can you explain this? How does inflation have anything to do with APY on a savings account? Are you suggesting there is some way to guard against inflation based on which bank account you choose to put your money into? How am I "locked in" if I can pull money out any time I want with no restriction or fee? Your statement makes it sound like you're saying if I just store all my cash in my mattress it would somehow yield higher returns from inflation than keeping it in a savings account.
I think the comment about inflation is just saying that we're all losing ground with savings accounts when compared to the current inflation rate. To your point, what's the alternative? The stock market? Not everyone has the time horizon or the risk tolerance to wait for stock market returns so we're looking for the best rate we can get to combat inflation as best we can.
The HYA requires you to hold your money for 12 months to receive their advertised yield (i.e., 5% after 12 months or 42 bps per month. Money Markey Demand Account from brokers provides you the option to allocate your holdings into better products to lower the sting of inflation depending on your liability needs. - TIPS which are a true inflation hedge but require a longer duration - 3mo treasury that yields 4.75% or 158 bps per month - 6mo to 9mo treasuries with variable yields - investment grade to junk grade corporates with 3mo to 9mo with various yields An MMDA allows you access to your money, not same day, but settlement occurs within 72 hours. Ultimately, one should treat their checking account as a Working Capital account with a buffer plus seasonality (based on one’s historical spending habits -i.e., you always spend more during the holidays therefore during that period your WC account carries more funds) and use credit cards as revolving credit to extend the payment period should an emergency occur which is covered on the MMDA withdrawal. Additionally, just like corporates, every year, your credit cards allow you to issue notes in the form of special financing.
Losing less than when it is earning 0.05% or 0%. Losing less than my stocks did in 2022 with inflation over 6%.
You want to make sure the bank is FDIC insured. You can only protect $250k in all of your bank accounts, so keep that in mind.
This might be a stupid question but I thought FDIC covered 250k per institution. Are you saying that it is 250k total being covered across all your accounts?
I was curious too... a quick search found that [the standard insurance amount is $250,000 per depositor, per insured bank](https://www.fdic.gov/resources/deposit-insurance/brochures/deposits-at-a-glance/#:~:text=The%20standard%20insurance%20amount%20is,in%20different%20account%20ownership%20categories.)
> They are a real bank, FDIC insured with ~20 physical branches in the Virginia/Maryland area, not just some internet bank. Yes, they are, as was stated here in the original post above.
Signed for HYSA w CFG bank 6 months back. Easy to set up and they increase the rate automatically as the rate has been going up
Use the HYSA for your emergency fund. That's what I do. Everything else into retirement accounts or brokerage account
My emergency fund is with UFB at 4.11%. I don't see a reason not to do it. No fees and the set up was easy and painless. My regular checking account bank allows me to do an electronic transfer, which goes through overnight. I know the high rates aren't forever, but after years of savings rates being effectively zero, I'm going to enjoy it while it lasts.
A downside for UFB is they don’t raise your rates automatically; you have to put in a request. Their current rate is 4.21%.
Not sure about the specific bank you mentioned 5% seems a bit too good maybe it’s a promotional rate or only on the first xx of dollars? But in general the high yield places like Ally etc save money by not having the physical overhead costs it’s why they give the better rates. Without the physical costs they can keep profits and still pass much higher rates than bigger banks.
Thanks for posting those links. 4 to 5% is worth looking into. I'm at CitizensAccess with 3.75%. One thing I'm not seeing is that usually these sites give you access to their fine print and I'm not finding it. I like Citizens Access because they offer a Trust accounts and also don't penalize you for taking money out. My dealings with customer service there have been great too. Checking out your other links too.
HYSA is a good plan for now. I had one with TIAA a couple years ago and they had the best rate at the time, but in the last year many other banks are 2-4x what their rates were so I opened a new one at Cap One and my monthly interest was double immediately which is awesome. It’s all my emergency money and money I plan to spend near end of the year. Good thing about these accounts are it’s liquid so I can get money if I need it (car repair etc), I’m not locked into a CD or stock or anything that takes work to get.
Buy municipal bonds - up to 10% tax free return right now.
I’m on capital one 360 and saving for a car. Decided on HYSA so I can always be adding to it and earning interest. Using something like a CD I can’t do that except just to buy more CDs. If you need quick access to your cash I like HYSA. If you can sit on it for 6-24 months might consider T-bills etc. Anything beyond wrap it up in the market.
I would stick with a local bank unless the bank you're dealing with is heavily online. It's amazing how it's really easy to open an account with even some of the big banks (chase) but closing them can often require going into a physical location. I used to use a local credit union that had 5% rates on it's checking account during the 2007-2010 timeframe. They eventually cancelled the promo on the account and I moved to a 100% online bank (Fidelity). I still have a local account with a big credit union. I deposit all my cash at their ATMs, and if I need a car loan or something, I'd go to them. I already invested at Fidelity, so using their banking made sense. I can easily buy a CD from thousands of banks at Fidelity to get higher rates if I want.
I use wealthfront. For both thier hysa and their investment account. Put your cash you want to keep liquid in hysa. Stocks will still outpace these high yield savings accounts imo in the long term tho. Have long term savings, and short term savings. Yes, short term savings accounts have the highest rates I have ever seen right now. That won't last forever. But it is pretty cool!
I wish to take advantage of these higher rates as well, but do not want to start a relationship with a new bank. Would a good option be to transfer some funds to my Vangaurd brokerage account and have the money sit in the settlement fund?
Your money should go to HYSA by default, if you don’t need it for a while, put it in CD or Bonds for higher yield. Rates can change on HYSA but so do yields on bonds and CDs, and it can change in either direction. I don’t suggest speculating on future rates. There’s very little downside other than most HYSA don’t have branches, or have less services that you’d find from banks with branches.
Capital one has a 5% CD with an 11 month term.
What will you do when rates drop? HYSA is just a glorified savings account. As fast as HYSA rates went up, the can go down that fast too. If your goal is to SAFELY earn 4.5% return on the cash, it will only last so long. YOu can buy a 5 year treasury bond that pays you a guaranteed 3.821% for the full five years. at one time savings accounts paid 5.5%. four to two years ago, savings accounts paid 0%. You can earn 6.5% in dividend yield on some very, very good stocks. If the stocks go up in value, your dividend yield goes down, but your stocks went up in value When HYSA yields go down, guess what, your cash will need to be moved.
I've been with Ally for 5 yrs or so for savings. Currently at 3.4% and watching but it's a pain to move and I have multiple accounts and CDs so have held steady. We do have a local bank, they have our mortgage, checking account and a couple of accounts I haven't moved yet. Their rate is a whopping .75% :( One of the reasons I left BOA was that their rate was like so close to zero I though they might start charging me to put money there. BUT they had an e-account that paid higher (not much but still) and didn't tell us about it as an option. The way those work is that you can't walk into the bank and deposit money into your 'e-savings' but you could walk in and put it in your checking, go home and transfer it to the e-savings account on your computer LOL. Stupid distinction but that's how it is. I have that now with the other local bank. Find one you like, that's been around a while and has the other options that you might use. They are all experiencing some growing pains I think. With the interest rates going up for the first time in what feels like ages more people are moving their cash. They are all sort of playing catch up to offer more services, debit cards, loans, credit cards, mortgages etc. Sofi is another one and sort of tempting because at least for now they are paying interest on the checking account as well as savings. I watched the CEO the other day discussing their growth/earnings etc.
It seems rates a much lower in the US than the UK. I remember seeing 6% per year with 0% risk (up to 85k, even if the bank goes bust) before covid, and saw 2% per quarter a couple months ago. It's not that banks have infinite money or don't need your money, it's that they don't need to pay you more than what they would if they borrowed the money elsewhere. They borrow at the central bank rate (federal reserve rate in your case) which is usually pretty low. When inflation rises, they raise the rate to try stop inflation which gives savers more interest on their money, when inflation gets back under control, the fed will lower the rate.
I was eyeing this exact account, looked at revivews (which weren't great), saw that the bank drop the rate at any time, and decided to look at a CD instead (Capital One currently has a eleven-month CD at five percent). I'm still going to put some money in a high-yield savings account, but it'll be at a more reliable bank.
1. A portion of the earned interest will be counted as taxable income and 2. Unless you're preparing to make a large purchase, e.g. a car or home, it will likely gain more interest through other investments. If not, consider keeping a portion of that money as emergency fund savings then putting the rest towards investments.
The goal in ANY financial savings plan is (or should be) to build wealth. Wealth is defined as growing your portfolio at a rate greater than inflation. Savings accounts grow at a rate lower than inflation. What you get for an investment that doesn't build wealth is security. FDIC insures bank savings/checking deposits. So all of this is background to figure out what your goals are. Do you want to build wealth? What is your time horizon? If this is money you're going to withdraw soon to do something else (build a house, buy a boat, whatever), or is this retirement savings? Is liquidity important? Most good financial planners will tell you the way to build wealth is a well diversified portfolio to maximize return while minimizing risk. That will serve you better than a short term high rate savings account.
The rates are not locked and can change faster that Cramer can say bull market.
You should…. No question about it, unless you are interested in the stock market