3 reasons to open a high-yield savings account this June
Saving money can be challenging by itself. But, as you start to build a financial safety net, you may run into a new challenge. You'll need to find a safe yet effective place to store your money.
After all, you want to make sure that wherever you store your money is secure - and in a best case scenario, insured. But, it's also important to make sure that your savings earns an impressive return. With the current inflation rate sitting at 3.4%, earning any less could mean your money doesn't buy as much in the future as it could buy today - making saving money for the future less attractive.
High-yield savings accounts may fit that bill - making them a compelling option to consider this June. Below, we'll detail why it makes sense to open one of these accounts heading into the new month.
Compare leading high-yield savings accounts now.
3 reasons to open a high-yield savings account this June
If you're looking for a safe place to store your money that makes it possible to earn a higher return than today's inflation rate, you could be looking for a high-yield savings account.
High-yield savings accounts may offer higher returns than other options
In today's inflationary environment, it's important that your savings produces a compelling return. And, high-yield savings accounts typically produce significantly higher returns than traditional savings accounts and other options. In fact, it's common to find leading high-yield savings accounts that pay more than 5% annually.
That's important this June. As persistent inflation continues to drive the prices of goods and services up, you'll need your savings to produce meaningful returns in order to keep up. High-yield savings accounts can do that.
"Don't leave money sitting on the table by leaving high cash balances in low yielding accounts," says Vijay Marolia, managing partner and money manager at the financial planning firm, Regal Point Capital. "There are plenty of attractive options available today."
Marolia went on to explain that money earning 1% in annual returns will take 72 years to double. But, when you earn 6% on your savings, it will double every 12 years. So, by opting for a high-yield savings account over a traditional option with minimal interest, you can grow your savings over a condensed time frame.
Tap into impressive returns with a high-yield savings account today.
Interest rates could go up
One of the reasons high-yield savings accounts are so attractive is that they provide impressive returns. And, those returns could grow ahead. The Federal Reserve's 23-year record high federal funds rate (a benchmark used by many financial institutions) is providing support for higher-than-average returns on deposit accounts. And, that 23-year record high stands as a result of persistent inflation. After all, rate hikes are the Fed's most effective way to combat inflation.
But, that could mean rates may go even higher. Although the most recent inflation report showed it had cooled slightly, at 3.4%, it's still well above the Fed's 2% target. And, with another inflation report slated for June 12, 2024 - during the Fed's next monetary policy meeting (being held June 11-12, 2024) - if inflation continues to run hot, the Fed could increase its benchmark rate further.
That could be good news if you have money in a high-yield savings account. That's because these accounts typically come with variable returns. So, if the Fed raises its benchmark rate in June, your high-yield savings returns could follow.
High-yield savings accounts are safe
When you look for a home for your savings, it's important that you choose to store your money in a safe place. That's not just true in terms of protecting your savings from inflation, it's also true in terms of protecting your money from any potential losses (as you could experience in the stock market and with other riskier assets).
A high-yield savings account is safe in both ways. These accounts aren't subject to changes in the stock market and they don't typically produce losses under any circumstances - which is important this June. Between high inflation, election year and geopolitical conditions, there's no telling what direction the market may move in ahead.
Beyond that, high-yield savings accounts typically offer FDIC or NCUA insurance on balances up to $250,000. So, you can rest assured that your money is safe. That's true even if the financial institution you open your account with closes its doors for good.
Take advantage of the safety that comes with a high-yield savings account now.
The bottom line
High-yield savings accounts offer a safe way to produce a meaningful return while maintaining liquidity. That makes them a compelling home for your emergency savings this June - or any other savings you may have for that matter. Compare today's leading options to take advantage of the benefits of these accounts now.
