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High Yield Savings Accounts

It is increasingly becoming obvious that keeping one’s entire investment portfolio in the stock market, even in generally safe stocks, is not the wise step it once was. It is true that most of us need a higher return on any savings for future needs -- retirement, kids’ college, medical expenses, etc., -- than is offered through more secure means. However, the thought of having plans for retiring wiped out by a single bad day in the market or losing one’s 401K can leave one planning on working until age 103 and really hoping junior can get that ballet scholarship he wants.

There are ways to balance the risk/benefit ratio even in today’s market. Continuing to invest in stocks still has the potential for a high return, particularly if the shows of faith which keep currency flowing into the market help the economy to rebound. However, like a gambler leaving all her winnings on the table in the belief that they will continue to accumulate, there is such a thing as too many eggs in one basket.

The same can be said of other types of investment. Even at the 3% APR most high interest savings accounts offer, the accrued interest will take far too long to accumulate. The advantage of such accounts is that they are FDIC insured and will not evaporate into the ether. Unfortunately, low-risk leads to low return.

It takes time and attention to tend one’s accounts, but taking this series of steps is one way to help provide much needed balance and security in a chaotic time. Most high-interest accounts have a minimum balance requirement, as do other investment forms. Keeping both accounts and stocks at that minimum and siphoning the surplus off into higher interest rate, yet still secure formats such as CDs and bonds, will increase the rate of interest accrual with a minimal risk. As with any investment where the option exists, it is vital to make sure the organization one is banking one’s income with is FDIC insured, as simply assuming everything is can lead to disaster. It is also important to find the best interest rate. This is a further advantage of CDs. While there can be some value in constantly moving a savings account to follow the best rate, it can also ultimately have the same results as driving around to find the lowest gas price. By investing in a series of CDs and bonds, it is possible to be aware of changing rates and hold off a few days or weeks to put money in the most profitable location.