A survey says about 20% of Americans have a high-yield savings account. Preston Cherry, founder and president of Concurrent Financial Planning, joined Cheddar News to explain why it's a good time to open an account now.

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The Pros and Cons of Opening a High-Yield Savings Account

If you have extra cash parked in traditional savings accounts, you missing out. The Federal Reserve keeps raising interest rates. So now some banks are offering interest rates of around 4% on their high yield savings products, while the national average yield is just zero 0.23%. In other words, you could earn 18 times more interest by moving your money to a high yield savings account from a traditional one. Joining me now is Preston Cherry. He's the founder and president of concurrent financial Planning. Preston. It's so good to see you. It's been years. So. Yes. Yes. What is a high yield savings account and how actually do they work? Ah yes. So high yield savings account, they tend to be located at online banks versus traditional banks, as you said. And a offer higher interest rates. I mean right now we hear the Fed uh interest rates are going up all the time. It's bad for borrowers, but it's good for savers. So we want to put this extra coupon in our in our pocket if we have short term money available and we could put this extra money in our pocket for those institutions that are offering this this higher rate. So a lot of people keep their cash at traditional banks because they think it might be a hassle or there's a catch. So can you break down the pros and cons of actually opening a high yield savings account. Uh Well, I mean, you can actually go to your location uh at your traditional bank, it's around your neighborhood institution, you can go there. Uh Now, when you're talking about online institutions, there's a little bit of a of a barrier. Uh Sometimes they have restrictions on how often you can withdraw your money. Sometimes five or six withdrawals. That said, if you're saving particularly for short term events, like a saving up for a car or a home or a wedding or a trip, you're not gonna want to withdraw anyway. And there may be some fees sometimes associated with these accounts. However, these institutions know this, so they're really not trying to uh put more barriers there to these accounts. They're trying to attract money so they can have more deposits on their books so they can lend in this high rate environment. So give me some names. I want specifics. What are some of the best high yield savings accounts out there? Oh wow. You're going to, you're going to hear about these names, I mean out in uh L. A. They had this the Sofi Stadium. Right? So you hear, Sophie you have Goldman has one, you have the lending club. So you have several online institutions that are offering these high yield savings account. So you can also go on your favorite browser search for your high yield savings account and look for these familiar names that you're used to because you want some uh you want those familiar names. So you can be confident that your money is FBI ensure that these institutions and know that your money is protected and you're receiving your rate from these familiar names. And you can also try your credit unions as well. So the money is insured up on our screen, we had one interest rate that was 4.25%. Pretty astounding. Do you expect interest rates on high yield savings accounts to go even higher this year? Well they could be. I mean we just heard that the that the Fed is keeping his eye on on inflation as we are all our I mean I just went to the store the other day and eggs are still high. So uh as as inflation or excuse me, those rates tend to creep up. These rates on the high yield savings fluctuate with those rates as well. When rates start coming down, then rates will also be variable in the other direction. So we will see they can go up if uh inflation persists, they can go up. Thanks so much. President Kerry, he's the founder and president of concurrent financial planning