Time for a real world example of the difference in Interest I earned having my money in a High Yield Savings Account (HYSA) vs a Low Yield Savings Account (LYSA). This is something that took me no more than 10 minutes to setup and can be something you can easily do yourself!
Where do you currently have your cash reserves sitting?
This is a very important question that nobody explained in detail to me. I kept all my cash in my Bank of America account because, well, it was easier to have everything in there. I had always done so and saw no reason to switch. Dang was I wrong!
In a prior post I spoke about what an High Yield Savings Account is (link to article), but in this post I want to speak more about the results I have seen since the last post. Previously, I kept all my money in my Savings Account with Bank of America (earning me .05%). Since learning about High Yield Savings Accounts, I switched holding my cash reserves from Bank Of America to Wealthfront. There are a ton of different High Yield Savings accounts that are beginning to popup and each of them offer different things. For my situation, I found that Wealthfront would offer everything that worked for me. High Interest (2.51% at the time and has since increased to 2.57%!!). Ease to transfer money to and from. I don’t need a bank to physically go to so I am fine with everything being online.
As I have transitioned some of my money to cash for the investment in my cousins bar, I wanted to ensure it was sitting in a High Yield Savings Account. At first I thought it just needed to be in my Savings Account in Bank Of America because that is the account I would earn interest on. Well that was a mistake that was!
I found out about Wealthfront’s High Yield Savings Account and immediately pulled the trigger. I transitioned my money over from Bank of America to Wealthfront. Now it was time to wait to see the difference in interest earned. I received my first interest payment yesterday from Wealthfront and I am excited to share the changes.
How did my Bank of America Savings Account pay out on $200,000 of cash?
Let’s take a look at how much interest I earned on .05%.
Tough to look at I know. My Bank of America Savings Account yielded $1.55 of interest on $201,414 in cash.
How does Wealthfront compare?
I have officially switched over to Wealthfront now for over a month. Wealthfront pays out interest monthly, so time to take a look at how much money I have earned in interest with almost the same amount of cash.
Just a little bit of a difference 🙂 a little bit like 183 times as much of a difference! Thank goodness for switching.
Now long term, I don’t plan on having much cash as I want to constantly deploy my cash into investment vehicles that are going to earn me monthly income, but while I am in this slow transition, I thought it would be good to go ahead and get this setup. I am glad I did or I would be earning almost nothing.
Key Takeaways:
- CALL TO ACTION: If you have money saved in a Savings Account, find out what your interest rate is you are earning. I went from earning .05% in my Bank of America account to now earning 2.57% with Wealthfront. As you can see from real world numbers, it can make a huge difference!
- Find a High Yield Savings Account that works for your situation. Here is a link to nerdwallet that I used to compare some of the different options: https://www.nerdwallet.com/blog/banking/best-high-yield-online-savings-accounts/
- Take Action today! No need to wait further if you aren’t earning much. What do you have to lose?
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