- The investment app Wealthfront offers an industry-leading APY on its high-yield account: 2.32% on all balance tiers.
- Before the Fed cut interest rates at the end of July,Wealthfront’s Cash Account hit a high of 2.57% APY.
- It’s important to ensure any high-yield savings account otherwise fits your needs before choosing it simply for a high APY, as interest rates are variable.
- A good high-yield savings account will still beat inflation and earn up to 25 times more than a traditional savings account.
- Wealthfront’s Cash Account is FDIC-insured up to $US1 million, fee-free, and requires a minimum opening deposit of just $US1.
- Currently, Business Insider readers who sign up for a Wealthfront investment account will receive their first $US5,000 managed for free in that account in perpetuity.
High-yield savings accounts have become commonplace in banking, and for good reason. They allow you to steadily grow money you need in the short term, with zero risk of losing it.
The ideal high-yield savings account has no fees, a low minimum-balance requirement, and a high annual percentage yield (APY), which is the rate you earn on your money on an annual basis.
When it comes to earning potential, Wealthfront’s Cash Account previously offered 2.57% APY, but on August 2 the robo-adviser announced the rate would drop to 2.32% after the Federal Reserve cut its benchmark interest rate by 0.25%. Still, its APY is well above the industry average for a general savings account, which earns 0.09%.
Wealthfront debuted its Cash Account earlier in 2019 with a 2.24% APY and had been steadily increasing it until the Fed announced its benchmark rate cut. While technically a cash account, it has the same features and a comparable interest rate to a high-yield savings account. Despite the latest rate reduction, the account is still fee-free, requires a minimum opening deposit of just $US1, allows unlimited transfers, and is FDIC-insured up to $US1 million.
Wealthfront recommends its high-yield savings account for storing money that’s going to be used within five years, whether it’s an emergency fund, down payment for a home, or an upcoming expense.
There’s no denying Wealthfront’s Cash Account is an all-around great deal. Still, the APY offered when you open any general savings or checking account isn’t locked in, so it’s always a good idea to make sure the account is otherwise desirable before putting your money there.
Why interest rates on high-yield savings accounts are bound to fluctuate
When you open a Cash Account at Wealthfront, your money is stored at one of its partner banks. These banks have interest rates that are determined by the federal funds rate, which moves up and down at the behest of the Federal Reserve. Wealthfront passes along the interest rate set by its partner banks to its own clients, so when the federal funds rate fluctuates, so too does the rate on your high-yield account.
As Wealthfront CEO Andy Rachleff previously explained in a blog post, “the fed funds rate influences nearly every financial institution, and a rate decrease directly impacts consumers. The good news: when the rate goes down, mortgage rates go down. The bad news: high yield savings account rates and Certificate of Deposit (CD) rates go down, too. Unfortunately that includes Wealthfront cash accounts as well.”
Across the board, high-yield savings accounts offer better rates than a traditional savings account, usually earning up to 20 times more even as interest rates shift, so you’ve already made progress toward automatically building wealth by keeping your money there.
Currently, Business Insider readers who sign up for a Wealthfront investment account will receive their first $US5,000 managed for free in that account in perpetuity.
- Read more:
- Robo-advisor Wealthfront now offers a new high-yield savings account with a minimum deposit of $US1 – here’s how it stacks up
- Ally vs. Marcus vs. Wealthfront: How 3 of the most popular high-yield savings accounts stack up
- American Express has a high-yield account to earn 20 times more on savings, and anyone can open it for as little as $US1
- The Fed has lowered interest rates for the first time since the depths of the Great Recession, but it’s still a great time to save money