I’m a huge proponent of online savings accounts (also called high yield savings accounts, or HYSAs for short) as part of our overall financial strategy. My clients and I have used them again and again to finally start saving and keep our savings safe from ourselves.
Plus, they also earn some nice interest! If you’re not keeping your money in a high interest account, you’re missing out. Spoiler alert: here are my favorites. But read on to learn why.
Here’s why I love them.
1. They are out of sight, out of mind.
HYSAs are separate from our checking accounts. Meaning, when we log in to our checking account, we don’t see this account or the money inside it.
This makes the money feel a lot less available, even though we could transfer it over in a few days notice. A lot of the banks that offer HYSAs also offer great checking account options. I recommend keeping your checking account completely separate.
2. They earn interest!
Right now you can earn around 4.0% on your HYSA which is probably over 100x more than what we would earn with a traditional brick and mortar bank.
If we kept a $15,000 rainy day fund in our HYSA at 4%, we’d earn $600 per year for doing nothing.
3. They are free.
These accounts should cost no money to set up and there should be no monthly fees or other hidden fees.
4. You can set up useful automations.
You can open multiple accounts (or sub-account / buckets) and name them different things at no additional charge.
I use names so that it’s clear that each dollar a job. For example, $5,000 in my travel account, $15,000 in my rainy-day account and $5,000 for summer camp.
Otherwise, we have one blob of savings that we have to account for in our heads. This gets messy and we might allocate the same dollar multiple times. I’ve done it!
You can open accounts for each of your goals and fund them with automatic transfers.
My HYSA criteria.
The next question I get is which banks I recommend. So, naturally, I went on a mission to find you the best HYSAs. Here are my HYSA requirements.
1. It’s free with no hidden fees.
There are plenty of free options to choose from.
2. You earn some interest.
Around 4.0% at the time I’m writing this but check to see rates are competitive.
3. It’s FDIC insured.
Most are but this protects you for up to $250,000 if something were to happen to the bank.
4. Good reviews.
We want these to be easy to use. By reading reviews we can hear about others’ experiences.