The unemployment rate has marginally improved , so why are Americans so worried about job insecurity, recession and cost of living? Americans are feeling negatively about their current job security, and feel a bigger recession is imminent.
Hence, finding a way to save cash and allow it to grow while remaining accessible becomes more pressing as the days go by. Beyond contributing to building your emergency fund, regular savings supplements your nest egg.
Checking accounts are ideal for all the transactions that move cash into and out of your bank; unfortunately, however, your checking account is less concerned with the future than it is with the present.
Sure, you can open a regular savings account—and it’ll help to prevent overspending and keep money aside. But wouldn’t you prefer to open something with a higher interest rate? Fortunately, there are high yield savings accounts that accrue interest far more significantly than other options.
Today, we’ll discuss the many benefits offered by these accounts, which will help you reach your financial goals.
What Are The Benefits Of A High-interest Savings Account?
Here are the five primary benefits of using a high-interest savings account:
1. It Offers Maximum Flexibility
Let’s start with a slight deterrent: other savings options tend to offer a higher return than high-interest savings. But they don’t provide easy access to your funds. In fact, in some cases, if you try to get your hands on that money, it’s considered a breach of contract and comes at a steep penalty. Thus, you could wait anywhere months or, in some cases, years before you can access these funds without penalty.
Conversely, high-interest savings accounts don’t make you select a predetermined date where you’re finally allowed access to your own money. This offers convenience when you might need some extra cash to make ends meet in the case of an emergency.
2. It Provides Security For Your Funds
Provided your high-interest savings account is with an FDIC-insured financial institution, you’ll likely be covered. When your account is covered, and—on the off chance—the financial institution responsible for your account goes under, the insurance should payout. Meaning you won’t lose your investment. It’s worth investigating such insurance options with your account provider because it’ll give you peace of mind.
3. It Helps You Create An Emergency Fund
We’d argue that there are three guarantees in life: death, taxes, and emergencies you could never have predicted. Whether it’s a sobering medical diagnosis or a flood in your basement, drastic times often call for extreme fiscal measures. Thus, ensuring you have an emergency fund is integral to your long-term financial health and overall quality of life. With high-interest savings, you have an option for your emergency fund that goes beyond regular checking accounts that collect negligible interest. The high interest account will yield a return instead of your money merely remaining stagnant like it would in a traditional savings product. Therefore, it makes for an ideal safety net.
4. It Offers Protection From Taxation On Income Using The Tax-free Savings Account (TFSA)
The IRS has keen eyes on any potential profits you might be collecting, even if it’s not your employment income. Fortunately, high-interest savings accounts are generally tax-free, meaning they’re outside the purview of the IRS. So, your funds can expand without any disruption from the government.
Be mindful of your TFSAs annual contribution limit. Exceeding this dollar amounts opens you up to taxation’s many perils. So, ensure that there’s enough space to move money into your high-interest fund. Any chance there is to hold onto your own money should be leveraged. High-interest savings accounts give you that opportunity.
5. It Helps You Achieve Your Savings Goal
A primary motivating factor in savings is setting up strategic personal rewards that maintain your momentum.
With high-interest savings accounts, there’s the ability to pay yourself first by saving for a unique goal. Prioritizing this fund in the same way you do your monthly utility bills, rent, mortgage, etc., will lead to expedited growth. It becomes far likelier to reach your desired dollar amount quicker than you’d otherwise imagine.
Conversely, it’s unwise to place your high-interest savings at the bottom of your priority list. This approach will prevent you from making the necessary efforts, even though the other payments are critical.
Starting and contributing to a high-interest savings account will pay tremendous financial dividends over the long haul. You’ll see your money grow as the interest accrues and compounds. Furthermore, you can access this tax-free money whenever you need, no strings attached. So, what are you waiting for? Open up your high-interesting savings account today and watch your wealth grow. It’s not quite magic—but it’s close!