It’s been nearly 15 years since your savings account earned a decent interest—what a time to be a saver.
Yes, inflation is over 8%, but we can find ways to beat that. The important thing is that high-yield savings accounts hit 3% interest rates.
If you are risk averse—now is the perfect time to put your money into an HYSA and start earning interest. Plus, there are ways to increase your yield by reinvesting your interest in higher-yielding products.
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What is a high-yield savings account? A high-yield savings account pays much more interest than a standard savings account.
Online banks usually offer HYSAs because they don’t utilize physical properties to conduct business. Therefore, they can pass these savings on to us.
Look at the difference between my Discover HYSA and my standard savings account at Wells Fargo. The HYSA receives 20 times more interest than the standard account.
You can see a massive difference between earning $32 in interest and seven cents. It’s not even a comparison at this point.
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Getting started with an HYSA. It is easy to start with an HYSA because they are just savings accounts. Here is a comparison of some top HYSA from Nerdwallet.
I like Discover because of the cashback debit card feature. I use the debit card with my Discover checking account and receive one percent cash back.
The redemption amount goes directly into my HYSA, effectively adding another percent to my yield. It looks incredible with interest rates so high.
Investing if you are risk-averse. If you fear the markets (stock, bonds, real estate, crypto), high-yield savings accounts can greatly boost your bottom line.
Certificates of deposit (CDs) will give you more yield (roughly 4.75% today), but they also lock your money up for a couple of years.
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There hasn’t been a better time to be a saver in the last 15 years. I received a risk-free $27 directly into my account.
I could treat my wife to McDonald’s with this money. It may sound funny, but that means you haven’t tried living on passive income.
The joys of passive income. HYSAs are essential to your investment journey because they serve as your first step.
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Indeed, the first account I opened in July 2019 was my Discover HYSA with $100. That month, I received six cents in interest, which was my first source of passive income.
The $27 I made is 450% more than six cents; this is the magic of compounding. But there is more you can do with your interest payments.
Converting interest into high-yield. What better way to start investing in the stock market than using your HYSA interest?
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If you had $10,000 in your HYSA, you would receive $25/month ($10,000 x 0.03 /12). That’s a massive amount of interest.
You can invest that $25 into many kinds of products that will continue to earn even more interest. Let’s take a quick look:
- Savings “I” Bonds– currently 6.89%
- 30-Year Bond Funds (BLV)- currently 3.78%
- Dow Jones Index Fund (DIA)- currently 1.82%
- Public Storage Preferred Shares (PSA.P) currently 5.57%
- Pimco Dynamic CEF (PDI)- currently 13.21%
- AGNC mortgage REIT (AGNC)- currently 14.39%
- ARCC Business Development Company (ARCC)- currently 9.90%
- McDonald’s (MCD)- currently 2.22%
- AT&T (T)- currently 5.84%
As you can see, there are various paths you can take to achieve yield, income, and growth. Or you can put all of these (except Series “I” Bonds) into an M1 Finance Pie—spreading your $25 across all products.
Get out of your comfort zone. If you are reading this, you probably think HYSAs are a scam. I have had my HYSA and debit card for over three years, and they are real.
It’s time to make a move to improve your life. HYSA offers you passive income for doing nothing except saving your money.
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HYSA as part of your emergency funds. Don’t forget that you will need to build your emergency fund throughout the years.
Your HYSA can help you build your Tier 1 emergency fund ($1,000), Tier 2 ($10,000), and Tier 3 (6 months worth of expenses).
Once you have $30,000 to $50,000 in your HYSA, you will make a massive amount of passive income every month.
At $50,000, you will bring in $125/month in interest. Imagine all of the high-yield reinvesting you can do with this money.
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Leading by example. Our children are looking to us for guidance. If we live in fear of the markets, investing, taking risks, and making mistakes, they also will have these fears.
One of the first lessons to teach our children is to save. By showing them the difference between a standard account and an HYSA, we show them that their money is valuable.
We are telling them that their money needs to earn money. They must conduct due diligence to get the highest, safest yield.
This mindset then carries over to investing in the markets, starting a business, buying property, and creating content. They will learn to maximize the “bang for their buck.”
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Conclusion. Opening an HYSA is more than getting higher interest in your account—it’s the start of a whole new journey.
My Discover HYSA was my first intentional step into a passive income lifestyle. From here, I became obsessed with building more passive income streams.
Today, we make $1,100/month in dividends and more from royalties, rents, and interest. Once you get going, it will be hard to stop.
So open an HYSA and feel the warm shower of passive income on the first of the month. It’s a fantastic feeling and one you will want to repeat often. 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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