The theme this week on the Retirement Quick Tips Podcast is: How to earn more on your cash

Today, I’m talking about earning more on your cash with a high yield savings account. 

Compared to parking your cash in checking or savings at your bank and earning virtually no interest right now, a high yield savings account is paying a much better rate - many of the ones I checked online were paying slightly over ½% - and most were in the .60% range. 

The problem with high yield savings accounts is that you may have to shop around for the best rates, and it’s not easy or practical often to open a new account, move your funds over, and keep it there, unless those high yielding rates stay competitive. 

One of the things I do like about high yield savings accounts from these online banks is that they’re FDIC insured, and it’s usually very  easy to access funds when you need them. 

A drawback as I mentioned earlier is that if you open one of these high yield savings accounts and the rates don’t stay competitive, you could be looking at the hassle of moving your funds to a new financial institution, which is a real pain and probably not worth the trouble. 

Another drawback of these accounts is that some require a certain number of transactions a month or additional deposits to get the higher rate, so just make sure you read the fine print.

And of course, always do the math. If you keep $10,000 or less in your savings and bank A is offering .5%, while bank B is offering .75%, that’s a difference of $25 a year in interest, so is it really worth it to shop around, transfer the money and close the old account? 

For me, it would never be worth the hassle, time and effort, for $25. On the other hand, if I have $100,000 in savings and the difference in rates in 1%, then that difference in $1,000 per year might now be worth the time and hassle of switching. 

Yesterday, I talked about money market funds. I prefer money markets to high yield savings accounts, because even though the rate is a bit lower, it does tend to adjust more quickly and could provide a higher interest rate compared to high yield savings accounts if rates continue to rise. Plus, since they’re mutual funds, you can easily switch to a different money market without opening and closing the account if you find a better money market alternative. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance