If you’re wondering which high yield savings account is best, I got you.
I use the ally bank High yield savings account
I personally use Ally bank. They have decent interest rates, which go up and down according to what the Federal Reserve dictates. Ally wasn’t involved in a Ghost Account Scandal like freaking Wells Fargo was, either!
Your high yield savings account may keep raising your interest rates, but remember inflation is still much higher. Each time Ally emails me, it feels like Bernie Sanders being like ONCE AGAIN…we have raised your rate! Yay!
Sure, a 3% savings rate sounds great. But inflation at the end of 2022 was more than double that at around 7.1%. So you are NOT gaining money when interest rates are lower than inflation. You are just essentially losing less money than if you had that cash on hand. Are there other high yield savings accounts with higher interest rates? Sure. It’s just not a priority of mine to keep moving my money around because my focus is on understanding inflation.
Having cash in an emergency fund is a must. And while increasing interest rates sound great, it’s important to be aware of the big picture. Your cash is still losing value. And you won’t ever get that money back. So make sure that the money in your savings account is only what you need to have access to for emergencies/short term savings goals, and invest the rest.
Investing is more important than interest rates
I see my emergency fund as more of a “solutions” fund. The cash in it is losing value. But that’s the cost of the peace of mind I’m paying for in order to meet my present needs. I know that if I have a random emergency or unexpected expense, I will be able to pay for it. I won’t stress about finding a way to get the money because it is safe and sound in my high yield savings account. With a few clicks, I can quickly access that cash and use it to solve whatever issue may come up.
I invest the rest for the future, whether it’s money I need in a year or 50 years. I invest about 90% of my money. When I worked as a stockbroker, I realized this is how so many casual millionaires were building wealth. They still had cash on hand to pay for the present and in case of emergencies, but they invested the rest to outpace inflation over the long term.
The stock market does beat inflation over the long run. It may not seem like it right now, but it is cyclical. It goes down before it goes back up. And even though we are in a down cycle right now, I am confident that my money will continue to grow. Building wealth is a long term process.
Having a debt payoff plan, understanding how the stock market and interest rates work, and feeling CONFIDENT to invest thousands of dollars in extra cash are ALL things I help my clients with. Let’s invest your extra cash! Click here to book a call with me.