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By Katie Levene
If you have questions about the best way to use your savings account or how to pick a new one, you’ve come to the right place! Check out this guide and learn some tips along the way!
A high-yield savings account is a type of deposit account that allows you to keep money safe and withdraw cash while earning a higher amount of interest than a typical savings account. A high yield account, also known as a high-rate savings account, is offered at many online banks and credit unions.
Like traditional savings accounts, high-yield savings accounts are usually insured by the National Credit Union Administration (NCUA) at credit unions, or by the Federal Deposit Insurance Corporation (FDIC) at banks. They can also provide easy access to your money while earning you a great interest rate, making them a good spot to hold an emergency fund or savings for a large purchase in the near future.
Some high-yield accounts have high deposit requirements or require direct deposits. However, it’s easy to find an account that doesn’t have those requirements.
When choosing a high-yield savings account, it’s important to consider the following:
Pro tip: Check out our blog about what to look for in a savings account to learn more.
To open a savings account, you are required to have the following:
You can have a savings account at any age. At Alliant, children under 13 years old can have a kids savings account with a parent or legal guardian as a joint owner. Teens 13-17 years old can have a regular Alliant High-Rate Savings account but must have a parent or legal guardian as a joint owner until they’re 18 years old.
You may need to lift a credit freeze to open a savings account if you have one. Credit unions or banks may run a soft credit pull to confirm your identity. The good news is that a soft pull will not impact your credit score.
If you’re opening a savings account at your current credit union or bank, you usually will not need to verify your identity with the information above. You could open an account by logging into your online banking.
A savings account allows you to move money around quite easily, although you may have transaction limits. It can be conveniently linked to your checking account, allowing you even more flexibility to transfer funds.
As we said above, your savings account is usually insured, which means if the credit union or bank closes, you will not lose your money up to $250,000.
Savings accounts earn more interest than a checking account but typically yield fewer gains than an investment account.
Savings accounts are ideal for your emergency fund and money you plan to use in the near future for large purchases.
Emergency fund: A savings account is less risky than an investment account, so your money will be there when you need it. Experts recommend having six to 12 months of expenses in an emergency fund. This will give you a cushion against sudden expenses or a job loss.
Savings for your big goals: If you want to buy a car, house or go on vacation soon, a savings account is a great place to hold your money. You won’t risk losing it in an investment and it will earn a little interest on your way to saving. At some banks and credit unions, you can even set up a separate high-rate account for each of your savings goals.
To learn more about saving, check out these blog posts:
Katie Levene is a marketer fascinated with finance. Whether the topic is about the psychology of money, investment strategies or simply how to spend better, Katie enjoys diving in and sharing all the details with family, friends and Money Mentor readers. Money management needs to be simplified and Katie hopes she accomplishes that for our readers. The saying goes, "Knowledge is Power", and she hopes you feel empowered after reading Money Mentor.
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