Lauren Smith, WalletHub Staff Writer
@laurenellesmith
High-yield savings accounts are safe because they’re insured up to $250,000, they allow you to access your money easily, and they don’t put your principal at risk. As a result, a high-yield savings account is just as safe as a traditional savings account. Just note, savings accounts have variable interest rates, which can impact your overall return.
Reasons Why High-Yield Savings Accounts Are Safe
Government insurance: High-yield savings accounts are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). This coverage provides protection for your savings-account deposits up to $250,000 per institution. In the event the bank or credit union fails, the government will step in to ensure your funds are safeguarded.
Held by government-regulated institutions: High-yield savings accounts are held by banks and credit unions, which are regulated by the government. These institutions are required to adhere to strict guidelines that help keep your money safe.
Your principal investment remains steady: Unlike stocks, for example, your investment is not subject to market fluctuations. The principal amount you deposit is returned to you along with any accrued interest.
While your principal remains intact, high-yields savings accounts have variable interest rates. So, your return may vary depending on macro conditions such as the general interest rate environment, competition between financial institutions, and the company’s performance.
Accessibility: High-yield savings accounts provide easy access to your funds, but there are usually some restrictions. Most savings accounts do not allow more than six withdrawals or transfers per month.
You can compare the best high-yield savings accounts here at WalletHub.
People also ask
What are the downsides of a high-yield savings account?
The downsides of a high-yield savings accounts can include limited growth, variable rates, withdrawal limits and many others. Before deciding on a high-yield savings account, it's important to consider these potential drawbacks:
- Limited growth: While they offer higher rates than traditional savings accounts, high-yield accounts often struggle to keep pace with inflation. This means your money might grow in number, but its buying power could decrease over time. For long-term wealth building, you might want...
Is it worth putting money into a high-yield savings account?
Yes, for most people, it's definitely worth putting money into a high-yield savings account, as it offers several key advantages, such as higher interest rates, safety, and liquidity, that make it a valuable financial tool.
- Higher Interest Rates: High-yield savings accounts offer significantly higher interest rates compared to traditional savings accounts. This means your money can grow faster over time.
- Safety: Funds in high-yield savings accounts are typically insured by the FDIC...
Did we answer your question?
Important Disclosures
Ad Disclosure: Certain offers that appear on this site originate from paying advertisers. For full transparency, here is a list of our current advertisers.
Advertisers compensate WalletHub when you click on a link, or your application is approved, or your account is opened. Advertising impacts how and where offers appear on this site (including, for example, the order in which they appear and their prevalence). At WalletHub we try to present a wide array of offers, but our offers do not represent all financial services companies or products.
Advertising enables WalletHub to provide you proprietary tools, services, and content at no charge. Advertising does not impact WalletHub's editorial content including our best picks, reviews, ratings and opinions. Those are completely independent and not provided, commissioned, or endorsed by any company, as our editors follow a strict editorial policy.