You may agree that uncertainty costs a lot these days. The COVID-19 pandemic taught us that we should prepare better for the period of crises. Thus, having a large savings pot, which can save you during economic disasters, is a quality prevention measure. True, you should make sure that you have covered all the essential expenses first. However, if you have some money left and it seems like the global market is recovering, you may want to open a high-interest savings account.
You may wonder, why should I open a high-interest savings account? Well, high savings, big reward! To get a better insight into how the high-interest savings account can help you increase your passive income and secure your future, stay here!
1. What is a high-interest savings account?
A high-interest-savings account represents a type of savings account that yields higher rewards. In other words, it is a bank savings account that has a higher interest rate, ensuring higher monthly and annual earnings. It is a smart decision to open the high-interest savings account if you have in mind large expenses such as a down payment on your home or a massive scholarship.
This type of savings account helps you reach your goals quicker. Moreover, you can earn 20 to 25 times more than with the national average rate! You just need to compare their annual percentage yield (APY) offers. For instance, if you are depositing $5,000 and the national average rate is 0,10 percent, you would earn $5 per year.
On the other hand, when you put those $5,000 on the high-interest-savings account with 2 percent rate, you can earn $100 per year. This sounds like great extra money, right? Add to that you don’t need to work for it, it is an incredible income opportunity.
You can build a large emergency fund and never worry about the uncertain future again. When you decide to reinvest the money you earned for lending your cash to your bank, you get a compound interest earnings. Considering that with the compound rate you can earn interest on interest, you can magnify your savings significantly.
Another great thing is that you can save a lot of money while still having ways to gain access to it. However, when you open a high-interest savings account, the restriction period is a bit longer. Let’s see the types of this account!
2. Account Types
Even when you decide you want to open the high-interest savings account, you still have to make a selection in the sea of options. However, it is great that today banks and other financial institutions provide a lot of interest packages, ensuring that your APY stays high. Thus, you choose one that fits you best. Unlike the traditional once, these accounts are quite beneficial.
The types of high-interest savings accounts:
Easy-access savings account: Here, you have immediate access to your savings and you can withdraw any amount of money you wish. As a result, the interest rate is the lowest for these accounts.
Notice savings accounts: This type of account gives you a slightly better interest rate due to a longer withdrawal period. In this case, you will need to give a 30-days notice to access your money.
Fixed-rate savings accounts: These accounts offer the best interest rates. If you open the fixed-rate account, you agree to lock your cash for one or five years. The longer the saving time frame, the higher the rate of interest!
These superb high-interest savings accounts are fantastic solutions for your budgeting needs. However, beware of the bounce trap when choosing a bank. Many of them offer only short term bonuses that disappear after the first year. You can also add savings to your existing bank. But if that isn’t your decision then double-check the contract! And remember you can always contact the HMHL team for help to avoid multiple financial traps!