Money For Nothing – Open A High Yield Savings Account

Are you one of the millions who has a savings account connected to your checking account earning close to 0.5% a year (APY)? Well you are not alone — Most people do this without even thinking.

In effect, you are loaning the bank money for free. When is the last time your bank loaned you money for free? Just like a mobile phone company which has better rates and doesn’t tell you, this situation by banks is abysmal and doesn’t enable the saver to really save any money.

Especially now with most banks hurting and in need of capital, they are offering Higher Yield Savings accounts often at 7-9x higher than the 0.5% you are currently getting. There’s a new crop of savings accounts now appearing with all of the features of a regular savings account – which are FDIC insured, and have online access with interest rates in the 2.5- 3.5% APY or above and some introductory offers as a $25 sign-up bonus or a 5% APY over an introductory period. Higher yields often require a higher minimum, but everyone benefits. And remember, whenever you hear the Federal Reserve changing interest rates, that effect you.

How much interest will I make?

Let’s say you have $5,000 in your savings account. A typical savings account earns about 0.5% APY, so after a year you’d have $5,050 in the account. HSBC, for example has a 3.5% APY, meaning that after a year, you would have $5,175.00 in the account, which is $125 more than you would in your local neighborhood savings account. Every year after that, the money you can make in a high-yield savings account is even greater than your local simple savings account. So this same money left alone over 5 years in your local bank would generate $5,126.26 vs $5,938.43 or an increase of $812.17

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The Bottom Line

How do I start? Personally I like HSBC, as it has the highest rate of any major bank, no fees and no minimum balance. Being a major worldwide bank also means top notch service, easy deposits and good online service. A few local banks have marginally higher rates, but I prefer a big bank if there if the rate is close. There are dozens of good bank out there and the rates change every week so can check in your local business section of the newspaper or better yet check online as the best place may not be the closest to your home. Make sure the fees are limited and check beyond the introductory period. Also see how you can make deposits if you are remote and make sure there is an online account.

You might also want to check stock brokerage accounts like E-trade and others, but make certain you are insured. Lastly, "Pay Yourself First." With each paycheck, put some money aside in your saving account, and watch it grow. Start today.