Ever heard the expression “the rich get richer?” Well, it is an expression for a reason: it’s true. I once read a small book entitled The Richest Man in Babylon. It is a great little book that I recommend, but I can boil down the whole thing right now for you into one phrase: make your money work for you. For different people, this can mean a number of different things, but for me that means taking the money that I had sitting in savings and start getting some interest on it. That’s right; I’m talking about High Yield Savings Accounts.
The economy is not good now. If that is news to you, then you must have just come out of a pretty deep coma. But even in times like this (maybe especially in times like this) people are looking for ways to make money by saving. Unfortunately, that is the opposite of what the market wants you to be doing right now. But since we are all beings with free will, we can put out money wherever we want to.
You may be asking a few questions now. Why do I want to put my money in these accounts? Won’t that lock it up, like a CD?
The answer to that is no, not at all. Because banks compete with one another and every bank knows that people don’t particularly want to give them their money, especially when the market is encouraging buying, this creates some perks for accounts. For example, a number of banks are now offering High Yield Savings Accounts without any monthly fees, no minimum balances, and relatively good (for now) interest rates between 0.7-1% that compound monthly or daily.
So why take the time to open these accounts and move your money to them when it is perfectly safe where it is now, under your mattress? It all goes back to The Richest Man in Babylon: make your money work for you. Every second that your money is sitting in a traditional bank account, or in a safe somewhere, it is missing the chance to make more of itself. And due to inflation, it is most likely also losing value over time.
So, let’s say you have $5,000. Would you rather it do nothing for you, or make you 1% of itself just by sitting in an account? The answer is pretty clear. Of course some readers may be asking themselves why they don’t simply invest that $5k and likely make much more than 1% over time? This, too, is a perfectly good option, but for a low risk person such as myself, the High Yield Savings Account makes more sense.
So, now that you are on board, which banks should you check out? My recommendations are Barclays (with the current highest rate of 1%), CIT Bank (who is right behind with .9%), and Capital One 360 (rate of .75%) who is the new incarnation of the great leader in this industry, ING DIRECT.