When it comes to having a high-yield savings account, most Americans are leaving money on the table.
Credit Karma surveyed 1,050 American adults about their savings habits and goals in August 2019.
Sadly, about 75% of people surveyed said that they don’t have a high-yield savings account.
A high-yield savings account is an account with a much higher interest rate than a traditional savings account — and that means that their money isn’t working as hard as it could be.
Traditional savings accounts don’t earn much interest: an average of .09%, according to the FDIC in November 2019.
That’s nothing compared to high-yield savings.
A high-yield savings account can earn up to 20 times more interest than a traditional savings account
Only 25% of Americans are taking advantage of the benefits of a high-yield savings account, which offer interest rates 20 times higher than a traditional savings account, with some as high as 2%.
While experts advise investing in the stock market to get the best return, high-yield savings accounts are a better option for money you want to keep close, but growing, to use within the next few years.
High-yield savings accounts are not investments. They’re liquid, making them great options for relatively short-term goals like saving for a down payment on a home or a car.
High-yield savings accounts are a great way to grow an emergency fund. If you’re saving large chunks of money for these purposes, that money could be earning hundreds of dollars in interest over time.
The 75% of Americans who don’t have one are missing out: High-yield savings accounts can grow your savings without any more effort than it takes to set up an account and initiate a transfer.
No excuse for not having a high-yield savings account
According to Credit Karma’s data, there’s a big reason why people don’t have one yet — and it’s a huge misconception.
Of people who don’t have a high-yield savings account, 44% said that the minimum deposit was too high.
That’s simply not true. many high yield savings accounts actually have a very accessible minimum deposit.
Two of the major players in the high-yield savings space don’t require even $20 to get started. Wealthfront requires a minimum deposit of $1 to use its cash account, while Betterment requires a $10 minimum deposit.
Besides Wealthfront and Betterment, there are many other banks that offer a higher rate of return on your deposit.
Credit Karma’s own account has no minimum deposit, and requires only one cent to start earning interest.
Other reasons people chose not to open a high-yield savings account is not knowing what it is (21%), being happy with their current savings account (19%), and not wanting to switch banks (17%). And 9% said they felt that it was too good to be true, not realizing that in this case, at least, high-yield savings live up to the hype.