High yielding savings accounts are a great way to save some money for purchase goals and investment which require a small or a moderate sum of money. There are several companies that offer 5% interest savings account, which is an extremely lucrative deal for someone who is trying to build a concrete financial portfolio. But such high yielding accounts require high amount of minimum balance. This means that you need to cleverly balance your overall finances so that it doesn’t affect your day to day spending activities.
It is obvious that a high yielding savings account is a worthwhile deal, but before you make any major financial commitments there are certain things that require your serious consideration.
Reputation of the financial institution
Firstly, research about the financial institution’s legal validity and image. Before you hand over your hard-earned money to them see if have they lived up to the consumer expectations in the past. Check online reviews or have a word with a fellow investor who has already had an experience with the high interest savings program. If you have a financial adviser, please consult them to gain more clarity on your potential investments.
When you are investing in a high interest savings account, your required minimum balance would be higher than usual. Therefore, make sure that the institution you’re dealing with is insured by Federal Deposit Insurance Corporation. The FDIC in simple words covers the depositor’s money in the banks. This safeguards your financial interests in the long run if something unfortunate were to happen.
You need to make sure that your overall financial health is sound. For example, if you are going to be needing this money frequently you should opt for a regular savings account. Withdrawal procedure for high yielding accounts can get restricted. So, think twice before investing in a high interest savings account as your accessibility to some extent will be limited. Ultimately it shouldn’t affect your daily essential spending.
Depending the financial institution, there can be other charges for monthly maintenance and for inactivity. It is imperative that you thoroughly inquire about such expenses so that they don’t cause any inconvenience later.
Some high yielding accounts might provide you with an ATM card, this can expand your spending capacity. But try and opt out from this feature as it can hamper your savings habit. Try to accommodate this account for your future investments like college tuition, home renovation, vehicle purchase, health reserve, etc. or for emergencies purposes.