What to Look For in a High-Yield Savings Account 2021
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Let’s be honest, we aren’t exactly set up for financial success on a national level when we’ve come to view debt as a fact of life. What we really need to get through the unexpected is cash!
Emergency cash ready to use when a crisis affects us directly is a must-have to be financially successful. There are many places to keep your money but my favorite and the option I recommended for most people is an online savings account with high interest.
High interest is usually a bad thing when you’re talking about it in the context of debt but in the cases of savings, it’s a great thing. It means that you yield more from what you save. It is far more than what you earn by keeping money in a typical savings account. Finding a good high yield savings account in 2021 isn’t hard to do, but it is an important choice.
Money is changing hands everyday despite whatever crisis comes up next. Loss of income, relief funds, etc. It’s a shuffle that makes getting and keeping your money feel like a game of three-card monte. A high-yield online savings account lets you keep more skin in the game, so to speak!
Why You Need a High-Yield Online Savings Account
Saving money is not always easy and can feel impossible at times. That’s why only a year ago a research poll reveals that nearly 2/3 of Americans couldn’t get $1,000 together for an emergency. This is critical and it goes beyond investing in your future.
If you have been budgeting and you want to know what to do with your money (after paying off debt!) the best options are either to save or invest.
Investing money for the short-term is a risky venture. The benefits are great but the greater the prize, the higher the risk. There are all kinds of different ways to invest your money such as buying stocks or government bonds. Each has significant rewards and drawbacks to consider.
Saving is different from investing. Saving is not exclusively about returns. It’s about keeping what you have and growing an accessible fund that will sustain you in emergency situations.
If you want to have $1,000 for an out-of-the-blue expense, you want that in a savings account, not an investment account. If you want three months of income, in case you lose your job, that too belongs in a savings account.
There are a lot of reasons for this involving various risks and penalties, but the best thing you can do if you don’t have a safety net is to build that savings first. Having said that, High yield savings accounts provide more incentive in the form of better interest rates for you.
In fact, I believe in this so strongly that I always tell people this is the one thing you need to do before you do anything else!
My Choice for Best High Yield Savings Account in 2021
There are a lot of great online savings accounts out there but currently I’ve found Axos Bank to have the best savings account of 2021. It meets all the non-negotiable requirements I think are important for a high yield savings account and exceeds some of them.
Axos Bank currently offers .61% APY, which is lower than historic yields but higher than almost any other account out there right right now. It also has no monthly maintenance fees or monthly balance requirements. Some banks say they offer this but require you to connect a direct deposit or transfer a certain amount in every month. Axos doesn’t require any of that. It also integrates into 3rd party personal finance apps.
I know there are other banks out there with higher APY but but they require you to jump through hoops that make keeping that high APY unsustainable. A savings account should be something you set and forget. When you’re beholden to rules it can make it not worth the hassle to keep up and you end up with a subpar savings account in the end.
To find out more about Axos, their online banking features, diverse offerings, and high yield interest, go to AxosBank.com and find out how to open your account, now.
What is High-Yield Savings?
High yield savings accounts (high-interest savings accounts) are accounts that give you higher returns on the money you save. It is typically an online savings account rather than brick and mortar. That means they have less overhead which empowers you to save more/earn more with their services. These banks offer varying levels of protection, costs, and yield.
Did you know a typical savings account only earns about .01% interest annually? That’s only 1% of 1%! High yield savings accounts offer significantly more. Usually, you earn between .4 and .5 percent, but you can earn 6.1% interest with Axos Bank. That’s a huge difference from .01%!
Protection
High-interest savings accounts are FDIC insured which means your money is safe. Since it’s a savings account and not a stock market investment, your money stays put until you need it.
Costs
Costs can vary for accounts. Some may include minimum balances. In general, an online high-interest savings account allows you to avoid minimum balance requirements, monthly service fees, withdrawal fees, etc. You can open a high yield savings account for free with a minimum opening balance that differs from one account to the next.
Better Returns
The main reason to save money in a high yield account is that the yield is higher. It’s the most rewarding way to save money because you get more interest off of what you save. Then, you earn even more interest off the total amount that’s now higher thanks to the interest earnings!
How do High Yield Savings Accounts Help?
A high-interest online savings account can mitigate all sorts of risks while earning you more money than a traditional savings account at a brick-and-mortar bank. We are all too familiar with how quickly things can come undone in this fast-paced world that seems to always be embroiled in one crisis or another.
It’s essential that we put the effort into saving up for emergencies so we can handle setbacks as they come. High yield savings accounts are the ideal tool for staying afloat when disaster strikes. Here are two ways you can benefit from high-interest savings accounts.
1. Build Your Emergency Fund
There is no better way to spend your money than on future relief for you and your family. Don’t make the mistake of opting to put all your leftover money each month into a high-interest savings account to build up your emergency fund. As we all know money has a way of disappearing by the end of the month, so you should pay yourself first by funding the account before you spend the money. You can budget whatever you are comfortable with but I suggest starting with $250 to get the ball rolling.
If you already have an emergency fund in a regular savings account, that’s great. Simply transfer the money to a high yield account online to get more bang for your buck! If you fully fund your account for emergencies and no emergencies come, you earn a bonus of between 4%-6% of your savings at the end of the year. If disaster strikes, be glad you have the cash to pay for it. It’s a win-win.
2. Keeping Money Out of Sight
Money in your checking account is money waiting to be spent. In order to save for something like a vacation, car, or other big purchase you need to keep those savings out of sight so you don’t “accidentally” spend it.
Also, if you collected unemployment in 2020, you may not have opted for taxes to be withheld. If that’s the case, you could wind up owing in your 2020 filing. This is exactly the type of thing that money in a high-yield savings account is good for.
What You Need to Open a High Yield Savings Account 2021
Opening a high yield savings account is easier than ever before. To start, you simply need to apply.
High Yield Savings Account 2021 Application
The online application you fill out will require you to enter the following:
- full name
- address
- telephone number
- email address
- Social Security Number (SSN)
Don’t be alarmed when they ask for your SSN. Interest earnings are taxable income, so this information is required. Because interest is taxable, I recommend saving in higher yield accounts to maximize your earnings.
Government Issued ID
As part of applying you’ll need a drivers licence, passport, or other government issued ID.
How to Find a Good High Yield Savings Account 2021
When you shop for the best high interest savings account for your needs, there are three main things to consider. look for these three things in your high yield savings account.
Ease of Access
This is very important. It’s a primary concern among consumers who save their money in online accounts. Make sure you have easy access to your money when you need it. An emergency fund is no good if you can’t access it in an emergency.
I like Axos because it’s recognized as a top-rated online bank by Go Banking Rates and My Bank Tracker. They have an innovative platform that makes everything easier.
Rate of Return
The yield your account produces is important and you need to make sure that the interest you earn will be as advertised. Some banks promote a certain annual yield only to qualify that with a minimum account balance.
Axos Bank offers a .61% rate across the board. no matter how much you save. This is arguably the most important feature to look at, since the whole purpose of saving in a high yield account is to earn more interest on what you save regardless of how much money that is.
Cost
Finally, look at the cost. some accounts won’t cost anything and others will have some cost or fees. Be careful about paying fees for a savings account that can’t yield enough money to pay for itself. That takes the whole incentive away. Online banking is relatively free of these kinds of costs because there is less overhead that the banks have to deal with. Make sure the bank you use is reputable.
While it’s not a cost, you should also consider the amount needed to open the account. This is the initial deposit you make. Banks will either require a deposit or not and they may require you to maintain a minimum balance. While these are not technically costs, they will impact your ability to save and use the money you deposit. Typically, high interest savings accounts have very high opening deposits, but you can open an account with as little as $250 with no minimum balance requirement.
You Have a Lot of Choices When it Comes to High-Yield Savings Accounts in 2021
Don’t get overwhelmed. If you already have a HYSA you like then stick with it, don’t stress over finding the best every time rates change. But if you need one (or another!) then look for one over .5% APT with no maintenance fees or minimum balance requirements.
Again, I like Axos Bank but the best savings account is the one you’re actually saving into every month.
Jen Smith is a personal finance expert, founder of Modern Frugality and co-host of the Frugal Friends Podcast. Her work has been featured in the Wall Street Journal, Lifehacker, Money Magazine, U.S. News and World Report, Business Insider, and more. She’s passionate about helping people gain control of their spending.