According to Yahoo Finance, “58% of Americans have less than $1,000 in savings.” As we know, many Americans are living pay check to pay check, with little room to wiggle when they’re hit with a financial hardship. People are faced with unexpected costs for emergencies with very little savings to cover them. Having a high-yield savings account not only gives you a piece of mind when you have money in there, but protects you from any downturn in the market, such as what we’re experiencing now. A high yield savings account is federally insured up to $250,000 with a FDIC insured bank.
Most traditional banks offer savings accounts. These accounts earn pretty much no interest. I use Wells Fargo Bank, which offers right around .01% on savings. So, you’re basically earning pennies on the dollar in a savings account with a traditional bank. I highly recommend not using the savings account with whatever bank you use where your checking account is. For example, I have my savings account with Barclays. Right now, it’s earning 1.60% interest and so far this year I’ve earned $49.29 in interest this year. I took a screenshot of it below as well to show you:
Now, $49.29 is way much better than pennies. What do you think? And we’re only in April right now of this year. This number will keep increasing as time goes on and I keep putting more money into this account for the remainder of the year. Now, there are many high yield savings accounts out there. Some require minimum deposits and have various interest rates. The great thing about most of these accounts is that you can transfer money from your checking to savings accounts as many times as you’d like. A high yield savings account is really great for emergency expenses or short term bigger purchases. Such as if you’re planning to buy a car soon and you need a down payment, or even when purchasing a house depending on the time frame.
Everyone is going to have a different amount of money in their savings account separate from their investment accounts, where they have money in the market. Do what’s comfortable. I’ve always heard the saying of having at least 6–9 months worth of expenses in a savings account. We’re now in a time when having cash in some sort of savings account is crucial, especially in these uncertain economic times.
Conclusion:
Having money sit in a checking account is really doing you no good. Keep enough money in a checking account to cover monthly expenses and whatever you feel comfortable with. I personally don’t usually keep any more than $1,000 in my checking account. But, that works for me. It may or may not work for you. Do what’s comfortable for you. The rest gets transferred into my high-yield savings account and my numerous brokerage accounts. Having a high yield savings account with money in there will give you piece of mind when unexpected expenses arise as well as downturns in the market!