One of the best ways to start your journey from non-saver, to a saver, to an investor is by opening a high-yield savings account (HYSA). In fact, my first passive income payday was from my favorite high-yield savings account.
Welcome back to the Investing for Interest series (101, 102, 103, 104, 105). I have recently been on a tear, making sure I am covering all about earning interest. Now, let’s get back to my story.
What is a High Yield Savings Account? When I first learned about passive income, I used a standard savings account for all my cash.
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I read multiple websites that said I could earn as much interest as a certificate of deposit (CD) but inside a savings account. This was back in June 2019, and the interest rate was 2.10% for a CD.
Online banks can offer HYSAs because they can pass on savings from not running brick and mortar branches. There were multiple HYSAs around in June 2019, but I chose Discover.
Why I choose Discover HYSA. I choose Discover for a few reasons—mainly because I love the colors.
Besides the colors, I also had heard of Discover cards my entire life, so I already had a level of trust established.
Finally, when I opened my HSYA, I also opened a debit card and checking account. This debit card offers 1% cashback on all purchases up to $3,000/month. This means you can earn $30/mo as cashback.
My experiences with Discover. I have loved every moment with my Discover HYSA and cashback debit card.
Because the Federal Reserve lowered interest rates in March 2020, my HYSA only offers 0.5% interest—which is a bummer.
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My favorite author, Robert Kiyosaki, says savers are losers. You have to have a broader investment strategy to survive inflation as a Saver. HYSA and cashback debit cards still play a massive role in your finances.
Why I use an HYSA. I use my HYSA as a first-line defense against random silliness. I keep $3,000 in my HYSA at all times—anything above that, and I invest that into a USDC stable coin for that sweet 9% yield.
As you can see, I am a little low right now. There was an excellent opportunity to invest in Google stock before the 20-to-1 stock split. I used some cash for my HYSA to invest.
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Another reason to maintain an HYSA is to lock in great investment opportunities. Yes, we all want to earn a yield on our cash; however, having cash on hand for quick-fire investing can also net you a great return.
You can also use an HYSA as part of your emergency fund pyramid. I like to use HYSAs, Saving Bonds, Treasury Bonds, and USDC to ensure my money is safe while earning an excellent yield.
Why use a cashback debit card? The cashback debit card is the icing on the cake as it can add some yield to your HYSA. I have my cashback going straight into my HYSA.
I also arranged $800 worth of shopping and bills to come from my debit card. Eventually, I’d like to get that number up to $3,000. Hey, $30/mo is a nice chunk of tax-free cash.
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Other online HYSAs. There are many more online HYSAs. I only use my Discover; therefore, I can recommend it. You want to look at some things.
1) ATM use. You want to see if they reimburse you for ATM usage.
2) Transfer fees. What are their transfer fees?
3) Overdraft fees. What is their policy for overdrafts?
From non-saver and beyond. An HYSA is the first step from a non-saver, to a saver, to an investor. You’ll start to see your monthly interest accumulating and get excited about the first of the month.
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It truly is a great feeling to earn some cash on your cash. The power of compounding compels us.
The next step after this is to look into savings bonds from the US Treasury. It may take some time to get comfortable going beyond saving, but that’s okay.
Conclusion. By moving into an HYSA, you are taking control of your finances. You are beginning to understand the importance of interest and yield. You will start to follow the Federal Reserve interest rate policies.
You’ll Need $20,000/mo in Passive Income
Opening an HYSA is a huge first step, so don’t underplay its importance. As I said earlier, my first foray into passive income was a 6 cents payday from Discover. I had $100 in my Discover HYSA in June 2019.
At the time, we were $77,000 in debt. Less than three years later, we are debt-free and have +$200,000 in the bank.
Please don’t hesitate to transition into an HYSA. It could set you on the path of financial security and even financial freedom. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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