With the increasing inflation and staggering economies, an additional passive income is a must for most, if not all, to make through it. While it’s great to monetize your talents and hobbies to make you a few extra bucks every now and there, would it not be amazing to monetize your money? Continue reading to discover how to use a high-yield savings account to earn money and learn how much $1000 can be made in one.
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What is a High-Yield Savings Account?
In simple terms, a high-yield savings account is a type of savings account that offers higher interest rates than standard savings accounts. However, it is much more than that; it is the best way to save while making money on money. With a significant difference in the interest rates, which can sometimes reach 10 to 12 times the national average, a high-yield savings account is a way to save and earn simultaneously. You do not even have to worry about the safety of your money, with federal insurance up to a limit of $250,000. These accounts are also easy to operate; unlike traditional banking systems, funds can be easily transferred between a high-yield savings account and a checking account, even with different banks, through a straightforward electronic transfer.
What to Consider in a High-Yield Savings Account?
Different high-yield saving accounts come with different features, making it crucial to compare and shop around for the best deal. Here are 5 factors you should consider before opening a high-yield savings account:
1. Interest Rate: The first and foremost thing to consider in a high-yield savings account is the interest rate it offers. While generally, their interest is higher than a standard savings account, the interest rate among various high-yield savings accounts differs. You can use offers like “introductory promotional rate” to get better than the best.
2. Required Initial Deposit: A high-yield savings account usually requires an initial deposit, which is a significant amount in most cases. If you have some extra funds that you want to invest in, a high-yield savings account is the way to go. However, you should think it through before opening an account if you lack extra funds.
3. Minimum Balance Required: Like any standard savings account, a high-yield account also requires a minimum, generally affordable balance. However, falling below the minimum balance requirement can result in penalties. So, before committing, you need to assess your financial needs and evaluate whether this is the money you can survive without.
4. Fees: Though the terms and conditions of a having-yield savings account are usually transparent, there can be hidden fees for which you should always be on the lookout.
5. Accessing Your Money: One of the significant considerations when opening a high-yield savings account is the ease of accessing your money. While having a minimum balance and an initial deposit is understandable, your money should always be easily accessible, especially in an hour of need.
How Much You Make By Depositing $1000 Into a High-Yield Savings Account?
A high-yield savings account, on average, makes significantly more interest income than a standard savings account. The general difference between the interest rates of a high-yield savings account and a standard savings account is 3.5% to 4.5%. However, in some instances, it can be as high as 10-12 times the national average. That is to say, if the national average is at 0.54 percent APY, while a standard account will yield $5.4 in interest over a year, a high yield can earn around $24.3, which can even go up to $64.8 for the same $1000.
Make Use of Compound Interest in HYSA
While a high-yield savings account makes significantly more than a standard one, the compounding can increase the interest income. Compounding is a simple concept; the interest is calculated on the principal amount and accumulated interest already. This way, the base amount for interest calculations keeps increasing, resulting in higher interest over time.
What is the Best High-Yield Savings Account?
While you should consider your circumstances when selecting the best options, the following high-yield savings accounts generally have overall positive feedback from various users:
- Poppy Bank
- My Banking Direct
- BrioDirect
- Vio Bank
- Ivy Bank
- TAB Bank
- TotalDirectBank
- Jenius Bank
- Newtek Bank
- UFB Direct
- Evergreen Bank Group
- CFG Bank
- North American Savings Bank
- Upgrade
- Popular Direct
Considerations and Risks
Although high-yield savings accounts are a great way to invest and save money, there are a few considerations and risks that you should take into consideration before making any financial commitments to such accounts:
- Check if the interest is fixed or floating.
- Subsidize the increasing inflation from the interest rate to calculate your actual earnings.
- Check the number of free withdrawals from the accounts before the institute charges a withdrawal fee, usually charged per withdrawal.
- Inquire about the minimum and maximum period the bank takes to transfer funds from your high-yield savings account to another account.
- See if the bank has a physical branch; if yes, check if it is accessible.
- Ask about the availability of ATMs, if they have any.
Conclusion
In crux, a high-yield savings account is the best way to save and invest your money, especially in the short term. While doing so, you enjoy easy access to your money at all times, with federal insurance ensuring its safety. Moreover, depositing $1000 into a high-yield savings account can yield significantly higher interest income compared to a standard savings account, with potential returns ranging from 3.5% to 12 times the national average. Just compare the different accounts and shop around for the best deals available.
FAQs
Should a high-yield account be used for long-term investment?
While a high-yield savings account is a good investment option, keeping your money in it for the short term is better. This is because it is easier to subsidize the increasing inflation rate in the short term than in the long term.
Is having fixed or floating APY in a high-yield savings account better?
Both fixed and floating APYs have their pros and cons. However, the rule of thumb is that a fixed rate is better when the market is in a downward trend, providing financial safety and stability. Meanwhile, in an upward-moving market, floating rates mean higher rewards.
Is there any upper limit for a high-yield savings account?
While there is no such upper limit for a high-yield savings account, it’s better to keep the amount around $250,000 as anything above that will not be covered under federal insurance, making it unsafe and a financial liability. Also, spreading your money across different accounts can lower risk and maximize potential earnings.
