“You can get past the dead end. You can break through the ceiling. I did and so have countless others.”

Finance Tip Friday #59: Are High-Interest Savings Accounts Back?

Currency with word SAVINGS on top in wooden letter tiles. Save money in savings account

 Remember when you used to be able to park your money into a savings account, sit back, and let the interest roll in?

Not to age myself, but if you’re a relatively young nurse practitioner, the answer is “probably not”. All you’ve ever known is that bank accounts pay roughly 0.01% interest. However, that wasn’t always the case.

Before the Great Recession of 2008, it was possible to get up to 5% APR on your money – especially if you had one of these relatively brand new “online savings accounts” (… Internet banking was just getting started). Ing Direct was one of the most popular providers at the time (now they’re Capital One 360).

What was great about these accounts was that they offered a place to park your earnings and wait while still earning interest, whether the goal was to build up a rock, solid emergency fund or have a few thousand dollars in waiting for the next stock market drop to hit and scoop up some discounted shares.

Now, thanks to the Federal Reserve raising the federal funds rate at an unprecedented pace in 2022, high-interest accounts are everywhere. You can go online right now and find dozens of reputable companies that are willing to pay you 3% APR or more for your cash. That’s not bad at all!

In today’s economy, the future is uncertain. British bank Barclays has warned that 2023 may be one of the weakest economies in four decades and that advanced countries will likely head into a recession. I don’t know if that’s true or not, but what I do know is that I smell opportunity:

  • It’s unlikely that the Feds will reduce the federal funds rate anytime soon. That means we could have several months or even years where we’re essentially getting a risk-free return on cash.
  • If the markets do sag in 2023, I want to be ready to add to my portfolio. A stash of a few thousand dollars in a high-interest account isn’t a bad place to be.

Whether you intend to invest this money or not, think about what your savings is currently doing for you. Good money management isn’t just about stocks and real estate. It can also include your cash.

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