High Yield Savings Accounts (or HYSAs as we often say at Verdi) are amazing, and not just because the interest rates are better than at most banks. But, before I get into those other, less obvious reasons, let me explain the math.
The national average savings account interest rate is about 0.07%. That means that if you deposit $1,000 today you’ll have $1,000.70 on May 26, 2022. You gained a whopping $0.70! On the other hand, if you use a high yield savings account (check out the Hot Tip Corner if you want to know which ones are our favorites), you’ll have $1,005.71. You gained $5.71! I know, I know...that isn’t actually a lot, but over time it can really make a difference. If you deposited that same $1,000 and then contributed $100/month for two years you’ll end up with $3,424.62. Of that, $24.62 is interest. Again, not a ton of money, but it is so much better than the 0.07% that you get at most banks. (Note: If you want to play around with the interest rate math, we like this handy calculator)
There are a couple other reasons we love HYSAs though (since the math on its own isn’t always convincing):
When interest rates start ticking back up, HYSA interest rates are going to go up. Your regular bank interest rates likely won’t. Or won’t go up by enough for you to notice the difference...
HYSAs are usually at institutions that are separate from where you do most of your banking. This means that you can keep your savings out of sight, making it more difficult to dip into them. You’ll be forced to wait a couple of days before you access the cash, which is perfect for those of us who may need a few extra roadblocks in place to keep us from financial self sabotage (🙋♀️)
And the math. I know it isn’t amazing, but $24.62 of free money is better than $3.01 of free money.
XOXO
HOT TIP CORNER: Our current favorite HYSAs are American Express and Vio.