5 Reasons I’m Glad I Opened a High Yield Savings Account
- For years, I left my money parked in a savings account earning only 0.01% APY.
- I decided to switch to a high yield savings account after learning more about their high rates.
- I chose Ally because of its savings compartments, which help me put money aside for different purposes.
- Check out Insider’s list of the best high yield savings accounts »
I started my job as a personal finance manager at Insider in January and have come a long way. I have always been interested in personal finance, but in many ways I was still a rookie.
During those first few weeks, I was less concerned with choosing a high yield savings account and more interested in knowing what a high yield savings account really was.
I’ve learned that a high yield savings account is usually offered by banks only online and pays higher rates than savings accounts at traditional banks.
can afford to pay higher rates as they do not need to cover physical branch expenses.
Once I got the hang of it, I started to wonder why I wasn’t taking the opportunity to earn more interest on my savings.
I’ve reviewed the accounts of many of the companies on Insider’s list of the best high yield online savings accounts, including Marcus by Goldman Sachs, Capital One, and Ally. I chose Ally because of their savings buckets and competitive APY.
I’ve had my High Yield Savings Account for two months now, and there are five main reasons I’m glad I took the plunge.
1. Savings buckets
One of Ally’s most notable features is its savings compartments. You name different goals within the same savings account, such as “Emergency Fund” or “Travel Savings”, so that you can track your progress. When you deposit money into your account, you can choose to keep everything in your main fund or split it between different compartments.
When my money was in a Chase savings account, it was a puzzle how much money I could allocate for different purposes. With Ally, I can set aside money on a paycheck for upcoming vacations, while steadily increasing my balance for my emergency fund.
Ally isn’t the only bank with savings buckets. There are several other savings accounts that are suitable for people who are trying to save for different purposes.
2. Customizable dates for my savings goals
Not only can you allocate your money toward specific goals with Ally, but you can also set time frames to meet those goals to ensure you hit them on time. This strategy has allowed me to balance long and short term financial priorities.
For example, I set a goal to save enough money to pay off my student loans by September 30, 2021 – when the federal student loan forbearance is about to expire – in order to avoid having to pay off my student loans. ‘possible interest payments.
I also created a goal to save enough for seats behind the plate at a Cubs game with my dad by June 5, 2021, the next time tickets are available for home games.
3. Higher interest rates
Since I was 15, I put money for my birthday and extra money from work into a Chase savings account, where I earned a paltry 0.01% in interest – lower than the national average of 0.06%. In comparison, the best
earn around 0.50% APY right now including Ally’s savings account.
I had about $ 3,000 in my savings account when I decided to switch to Ally. If I left this balance intact with Chase for a year, I would have $ 3,000.30. With Ally, I would have $ 3,015.04, which is $ 14.74 more.
Of course, I won’t become a millionaire overnight by transferring my money from a Chase savings account to an Ally high yield savings account. But when I can earn 50 times more with online banking than with physical institution, the choice is obvious.
4. Simplified process for transferring money to and from my external checking account
I still have a checking account with Chase, so it was important for me not to run into any issues when transferring money between the two financial institutions. I could also have opened a checking account with Ally, but still wanted to have access to a physical institution so that I could speak to the representatives in person and deposit money.
I have set up automatic transfers between my checking accounts and my savings account, so that every time I get paid some money automatically goes into savings with Ally – out of sight, out of mind. While it takes around two days to transfer money between the two accounts, transferring money is as easy as pressing a few buttons.
5. Tools that show my earning potential
Ally will show you your projected balance in three years if it is not changed, with interest paid taken into account. But the real benefit of this feature is that you can see how recurring transfers of a certain dollar amount per month can increase your balance exponentially.
I enjoyed playing with the numbers and seeing the effect of different savings strategies on my finances. For example, my current balance of $ 4,183 would turn into $ 4,245 if it was left untouched for three years. If I contributed only $ 100 per month for three years, my balance would be $ 7,871.
Opening a high yield savings account made saving a little less of a chore than something worth getting excited about.
Ryan Wangman is a reviewer at Personal Finance Insider, which reports on mortgages, refinancing, bank accounts, bank reviews, and loans. As part of his past personal finance experience, he has written on credit scores, financial literacy and homeownership.