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The deadline to file your 2022 taxes is fast approaching. if you Your return has not been filed yet, you have more than a week to do it. If you’ve already filed and are owed money, chances are you’re eagerly awaiting your refund or have already received it.
It’s easy to feel tempted to splurge when you have a lump sum outside of your normal income. But the smartest financial decision is often to save that money for the future, ideally somewhere it can earn interest.
Enter: High Yield Savings Account. are high yield savings accounts A great place to raise funds for various purposes. In this article, we break down why a high-yield savings account could be just the place for your tax refund.
If you’re interested in opening a high-yield savings account, check your rate here.
4 Reasons to Put Your Tax Refund in a High-Yield Savings Account
Consider depositing your tax refund in a high-yield savings account for the following reasons:
You will earn more than regular savings account
High-yield savings get their name because they deliver — you guessed it — a higher yield Regular savings account. how much more Currently, the average interest rate on regular savings accounts is around 0.23%. High-yield savings account rates, on the other hand, are around 3.5% to 4.5% (or higher). This makes these accounts a no-brainer if you’re looking for somewhere to keep your cash.
And since interest rates on savings accounts vary based on the federal funds rate, now is a Great time to open a high-yield account If you don’t already have one. High interest rates There are many negative effects, but one positive is that they increase how much your savings can earn.
Explore current rates to see how much you could earn with a high-yield savings account
You can build an emergency fund
Experts recommend keeping at least three to six months worth of expenses emergency fund. This will cover your daily living expenses if you lose your job.
It can also pay for unexpected big expenses like a surprise home repair or medical bill, saving you from relying on credit. Credit card or personal loanInterest charges cost you more than what you originally borrowed.
Plus, because high-yield savings accounts are more liquid than savings products CDYou can tap into your funds as needed without penalty (as long as you adhere to any withdrawal limits).
You can save for a short-term goal
High-yield savings accounts are a good way to set aside money for a short-term goal, such as a vacation, wedding or new car. You’ll need to do more toward these goals to earn interest, and keeping the funds you set aside in a separate account from your checking account can avoid the temptation to dip into them for other purposes.
Your money will grow risk free
You can potentially make big money by investing in the stock market, but it is risky. You can easily lose big money overnight. A high-yield savings account may not be as exciting as playing the market, but it’s much safer.
If the federal funds rate falls, your interest earnings will decrease, but you won’t lose any of the principal you deposited. And in the worst case scenario, If your bank failsYour money is protected by FDIC insurance up to $250,000 per account per bank.
Start your search for a high-yield savings account by reviewing the rates available here.
A windfall like a tax refund can be exciting, and if you want to treat yourself a little, there’s nothing stopping you. But even if you decide to splurge for a little something, the bulk of your refund is one High Yield Savings Account. Your money will make more money, and you’ll have something to rely on in the future, whether you need it in a pinch or plan to use it for a goal you’ve been waiting for.
As with any financial product, be sure to shop around Find the best rate.
MoneyWatch: Managing Your Money
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