Savers who opened accounts 10 or 20 years ago may be earning far less than they could with high-yield savings accounts that offer significantly better interest rates.
High-yield savings accounts from credit unions and online banks now provide rates several times higher than conventional savings accounts, helping people build emergency funds with existing money.
Chelsea Houston, a member advisor at iQ Credit Union, said these accounts allow money to work harder for savers.
“Your money can work for you instead of you doing all this work for it to earn money,” Houston said.
Financial experts recommend that savers earning less than 1% interest switch to high-yield options. Houston said account holders can save an average of $920 per year with these accounts.
“You put this much in here and this much in here, and that’s you’re going to get 300 bucks every single month for doing nothing,” Houston said.
The accounts don’t require large initial deposits. Houston suggested starting with regular small contributions.
“So you can do your everyday transactions through one and then set it maybe $10 a week or even $10 biweekly, like don’t buy one coffee for the week, and then you can save that in that savings account,” Houston said.
Many high-yield accounts come from online banks or smaller credit unions. Financial experts recommend verifying that any institution is federally insured before opening an account.
Interest earned from these accounts counts as taxable income and must be reported during tax season.
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