"Compound interest is the 8th wonder of the world. He who understands it, earns it. He who doesn't, pays it." - Albert Einstein
Put Your Savings to Use. Any Use
It should be a goal of ours to earn some rate of return on our savings. A great risk free option is a high yield saving account.
Most traditional saving accounts offer very low interest rates in the neighborhood of .05%-.25% per year.
Some financial institutions however (ie: some credit card and brokerages) offer online saving accounts that are FDIC insured and pay interest rates ranging from 1.4%-1.6%.
They are able to afford paying these higher interest rates because they don’t have a lot of the overhead that traditional consumer banks have.
These banks generally don’t have ATM’s or local offices you can use to access your money. All of your banking is transacted online with these accounts.
Online Savings Accounts
This may seem daunting at first but it’s really not a big deal. With the convenience of apps, you will always have your money at your fingertips.
Some accounts have maximum withdrawals allowed per month, but again this isn’t a huge deal as you shouldn’t need to access your savings that frequently anyways.
Below are some options of high yield savings account providers, I’ve focused my search on the most reputable institutions:
There are other banks that offer higher rates, however these are generally lesser known banks and likely don't have as much investment behind their app/technology as some of the more popular and larger companies.
Rates First, Then Convenience
When deciding which company to choose for your high yield saving account, first look at the rate they offer. You want your preferred bank to offer rates comparable to the rest of the market.
Once this is satisfied, the decision should boil down to convenience. If you have a credit card with American Express, go with American Express for your savings.
When you do this you can leverage the convenience of their technology and access/view both of your accounts from their app.
This is exactly what I did with my account. I have a Capital One Savor Card and so when I chose my saving account bank I went with Capital One. They have a really great app, and it makes switching between viewing my savings to paying my credit card really easy.
Great Risk Free Way to Maximize Return on Savings
This is one crucial step in improving your savings. An extra couple percent on your money compounded over time can yield substantial results. The best part about this too is that it is completely risk free.
It takes a bit of work and time to set up your new account and wire the money, however it is well worth it and is overall a great way to increase your passive earning.