Should You Put Your Stimulus Check In A High Yield Savings Account?
COVID-19 has disrupted the economy and disrupted people’s lives. Millions of people have lost their jobs or have seen job gaps. Today, countless numbers of consumers still cannot meet their most basic personal financial needs. For them, and maybe even for you, the federal stimulus checks are a much-needed relief that couldn’t have come too soon.
The US bailout, enacted in March 2021, will distribute stimulus checks of $ 1,400 to individuals and $ 2,800 to married couples, plus an additional stimulus payment of $ 1,400 for each eligible child. Income will determine eligibility, and not everyone has received (or will receive) a check.
This third stimulus check, like the previous two, is intended to stimulate the US economy by consumers spending their direct payment in cash, potentially on non-essential items.
But, a better and much more convenient way to use your stimulus money is to start or add to your emergency fund by depositing the funds into a high yield savings account instead of a checking account.
The national average savings account only earns 0.04% APY, according to the FDIC. Explore High Yield Savings Options via the Credible Marketplace to save extra money.
Who should consider a high yield savings account for their stimulus check
Is Investing In A High Yield Savings Account Right For You? If you find yourself in financially unstable ground – like digging into your emergency savings or the money you’ve saved for retirement, the $ 1,400 check can help pay for groceries, rent, gasoline, utilities and to pay off debts like a personal loan or student loans. Of course, how the last payment is used is up to you, but it may be beneficial to speak with a financial advisor.
If you are financially secure, already saving money, and have your basics covered, one practical use of the money is a high yield savings account. Just visit Credible to find a high yield savings option that best meets your goals. High yield accounts earn more interest than a regular savings account or certificate of deposit (CD), and you have access to the money when you need it.
However, you can only make a certain number of withdrawals before paying a fee, which limits the accessibility of your ATM. And, because interest rates are variable, the interest you earn today may not be the same as what you earn tomorrow.
Benefits of a high yield savings account
Many banks and credit unions offer high yield savings accounts. Online accounts generally offer higher interest rates than traditional banking locations. No matter how much money you have to deposit, you can save extra money with Credible’s high yield savings options.
High yield accounts not only give you a stable place to store your stimulus check, but thanks to higher interest rates, your money will grow much faster than with a traditional account.
Other benefits of a high yield savings account include:
- They can help you build an emergency fund much faster than traditional savings accounts.
- They make up interest, which means you earn interest on the interest already earned, as well as on the principle.
- Current interest rate hover around 1%, which exceeds the rate of 0.06% on regular savings accounts.
- Your money is safe because high yield accounts are FDIC insured up to $ 250,000.
- You can get your money back when you need it.
- Most high yield savings accounts do not have account maintenance fees, such as fees for minimum deposits or maintaining a minimum account balance.
- If you choose an online savings account, you can probably access your account from most mobile devices with online banking.
- You can transfer your money from your high yield savings account to another bank account.
Other investment options to consider
The $ 1,400 stimulus check is a pretty generous cash reward. And while a high yield savings account can grow exponentially, there are other investment options to consider. But remember, not all investments make money and you could lose your $ 1,400, so choose wisely where you invest your stimulus check money.
- Add to your IRA or 401K. If you have an IRA or 401K account, depositing your check for $ 1,400 is an investment in your future. Some IRAs pay up to 1.25% right now, but most are between 0.8% and 1%.
- Check out stocks and ETFs. Exchange traded funds or ETFs allow you to invest in a variety of stocks with a single investment. Assuming you keep your money in the ETF for 10 years and get a 7% annual return on your money, it is possible to double your investment by $ 1,400.
- Invest in dividend paying stocks. Dividend-paying stocks pay you to own them in the form of a dividend that you receive quarterly or annually. This dividend may be as low as a few dollars per share, but the more shares you own, the higher your dividends.
- Put money for your studies. Maybe you’ve delayed going back to school, but with the extra stimulus money, maybe it’s time to take the plunge. Sure, you won’t earn any dividends or interest on the $ 1,400, but you will be investing in your future, and that is priceless.
If you don’t have a high yield savings account yet, now is a great time to open and start investing in one. Your federal stimulus money could be well served in one, and it can help you if you need to make a mortgage payment, help paying off credit cards, a car loan, or a home loan.
Interest rates may be low right now, but they may not be forever. Your money is safe, and within reason you have access to your money whenever you need it. Explore all your options and learn more money with high yield savings options through Credible.
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