With the economy being the way that it is today, many people are turning to high yield savings accounts for financial security. However, there are a few things to consider before turning to any type of investment.
A high yield savings account is a great safe place to put your money, but you have to watch for the strings that are attached. Nothing in life is free, especially not interest from banks. These types of savings accounts usually have a whole lot of requirements that have to be met to make that interest.
There are some types of savings accounts that are commonly higher yield accounts. Limited access accounts are usually higher, minimum deposit accounts are also typically high yield and a few others are also usually higher yield.
The Typical Requirements
A high yield savings account is like a dream come true, you get to earn top dollar on your principal without any fear of losing it. That is simply the perfect investment formula. Banks are in the game to make money, so obviously if they are willing to give away a bagful of interest there is something for them to gain. Well the first catch is that you are not going to earn a bagful of money on your principal, you will earn a higher than average interest rate on your money, but that could be around 2% which really is not too shabby, but may not be your definition of high yields. Basically put a high yield savings account simply means that your Annual Percentage Yield (APY) will be higher with this type of account than it would be with a typical savings account.
Usually one of the requirements is a specific minimum deposit that deposit amount will vary from bank to bank, but almost all will require a minimum deposit. Another favored requirement that you will find with most banks is that you have to maintain a rather high balance through out the life of the savings account. Minimal withdrawals are also one of the requirements of these high yield accounts.
The requirements are set up to benefit the bank or the financial institution, they get to use more of your money for a longer period of time, it also helps with their daily audits so they can show a higher positive cash flow, this is a complex theory. Banks like for their investors to feel secure, a higher positive cash flow makes everyone involved feel warm and fuzzy.
Click here to learn more about high yield savings accounts and other long term investments.
For more information, please visit: High Yield Money Market