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What is a High-Yield Savings Account?

It’s already late February, so hopefully, by now, you’ve already received your annual bonus. Or perhaps that tax refund direct deposit might be hitting your checking account in the next few weeks. In any case,  if you have (or will soon have) a few spare bucks lying around, our latest post on What is a High-Yield Savings Account is for you!

What is a high-yield savings account?

According to the Federal Deposit Insurance Corporation, or the FDIC, the average savings account currently has an annual percentage yield, or APY, of 0.09 per cent. In other words, let’s say you deposited $100 into an average savings account at an average bank on the first business day of 2019. If you leave those $100 alone throughout the current year and make no new deposits to the savings account, by the end of the first business day of 2020, your account would (or should) have a balance of US$100.09.

Needless to say, 9¢ isn’t much to show for a year, especially after considering that around $8,000,000,000,000 (no, that’s not a typo, that’s $8 trillion) are currently invested in savings-type accounts around the country.

As opposed to average, 9¢-or-less savings accounts, high-yield savings accounts pay more interest, thus generating a higher yield for you. High-yield savings accounts, including the account options that we explore below, tend to be offered primarily by online banks due in part to the simple fact that these banks simply spend less than brick-and-mortar institutions (e.g. no branches, fewer employees, etc.).

Five Stellar High-Yield Savings Accounts

Understanding What is a High-Yield Savings Account would be much better if you go through our list. To help you get a bit more than 9¢/year on your savings, we’ve put together a list of five high-yield savings accounts, each of which offers an APY of at least 23 times the national average. If you don’t already have one of these accounts, it’s time to rethink how you manage your personal savings!

Ally Bank

Do you have Ally Bank’s Online Savings Account?

If you answered no to this question, we strongly suggest familiarizing yourself with Ally Bank’s website. Ally’s Online Savings Account is honestly one of the industry’s most competitive products, offering an APY of 2.20 per cent, which is more than 24 times the national average. Also, unlike many of its competitors, Ally has no monthly maintenance fees and no minimum balance requirements. On top of this, Ally offers all the standard benefits that you might expect from a brick-and-mortar bank, including checking accounts, online banking and an app with mobile check deposit, which is probably why Americans poured nearly $13 billion worth of new deposits into Ally in 2018.

American Express

Thought Amex was just about nice credit cards and traveller’s cheques?
Wrong.

For over 10 years, practically any adult resident in the U.S. has been eligible to apply for American Express’s Personal Savings High Yield Savings Account.

The Personal Savings High Yield Savings Account offers a 2.10 per cent APY and is easy to open. No fees, no minimum balance requirements and the account can be opened for free (although any account not funded within 60 days will be closed).

While the Personal Savings High Yield Savings Account is not accessible through the Amex app, online banking is available and the account can be linked to an American Express card in online banking, proving for a seamless experience for Amex cardholders.

CIBC

Canada has given us a lot over the years, from Peter Jennings and Alan Thicke to The Weeknd and, more recently, the CIBC Agility™ Online Savings Account.

The Agility™ Online Savings Account brings real meaning to Justin Bieber’s “Santa Claus Is Coming to The town,” offering a whopping 2.39 per cent APY—over 26.5 times the national average!

The Agility™ Online Savings Account also comes with great perks, such as direct deposit, no maintenance fees, no minimum daily balance, and access to the CIBC US Mobile Banking App.
Unfortunately, though, the best things in life aren’t free and a $1,000 deposit is required to open this account so you might end up waiting until after your tax refund comes through to get started with this one. Fortunately, after the account has been opened there’s no need to keep your $1,000 with CIBC; you only need to maintain a balance of 1¢ to earn the 2.39 per cent APY.

Marcus

If you thought that Goldman Sachs only counts high-net-worth individuals among its clients, you’re wrong.

Well, sort of.

Marcus, an offshoot of Wall Street investment bank Goldman Sachs, counts high-yield savings accounts and personal loans among its offerings. It is one of the names to remeber when wondering about What is a High-Yield Savings Account? Marcus’s Online Savings Account offers an APY of 2.25 percent—there’s no minimum deposit to open an account and the account has no maintenance fees. $100 in Marcus’s Online Savings Account would earn $2.25, or exactly 25 times the national average, over the course of a year. There’s one downside to Marcus though—you’re stuck tracking your finances from your bulky, old desktop or from your heavy laptop, as there’s no snazzy app to track your savings from the convenience of your smartphone!

PNC Bank

Have you heard of PNC Bank?

If yes, then this account probably won’t be to0 helpful to you, as PNC’s High Yield Savings account is only available to residents of the 31 states (excluding the District of Columbia) where PNC currently does not have a brick-and-mortar branch.

But, if you live in one of those 31 primarily western states, then you’re eligible for PNC’s impressive 2.35 per cent APY. Plus, as the only major brick-and-mortar bank on this list, PNC offers a lot of perks that the other banks mentioned above don’t, including a full suite of personal financial products, such as credit cards and checking accounts, which can be easily integrated with your High Yield Savings account through PNC’s online and mobile banking offerings.

Like the other accounts, there are no maintenance fees associated with the High Yield Savings account and no minimum daily balance requirement. You can open the account for free and can earn the 2.35 per cent APY on balances above $1; however, the High Yield Savings account is a six-month commitment, as closing the account within six months will entail a $25 penalty.

Mutual Funds vs ETF

Mutual Funds vs ETF: Recently, there has been a lot of discussion about exchange-traded funds (ETFs) being one of the best investment channels. For the uninformed, these funds may seem like mutual funds as they pool together the money of investors to buy a portfolio of bonds and stocks that are diverse. So what exactly is the difference between the two?
In fact, there is not much of a difference between ETFs and mutual funds. One of the main differences between the two is the fact that you can buy a share of ETF through a brokerage, like stocks, not through a fund management company that sells mutual funds.

Here are some important factors of the debate about Mutual Funds vs ETF:

ETF:
Also known as Exchange Traded Fund is an investment fund which is traded on the stock exchange. The assets held under an ETF are commodities, stocks and bonds. These are traded for an amount close to the original net asset value of the asset, during a trading day. ETF can be used for the following purposes: Hedging, Equitizing Cash and for Arbitrage. ETF shareholders get a part of the profits, i.e, the dividends paid and interest earned. They may also get a residual value if there is a liquidation of the fund. ETF shares are usually traded on public stock exchanges so these shares can be transferred, bought, or sold easily like the shares of a stock.
ETF supply is regulated through “creation” and “redemption” processes that involve some special investors, also referred to as authorised participants (APs). APs are usually renowned financial institutions such as banks and investment firms that have a great deal of buying power.

The key advantages of ETFs are as follows:
Investors can sell short or buy on margin. They can also purchase one share, as there are no minimum investment requirements.
The commission that is paid to the broker when buying or selling ETFs is the same as that paid for a regular order.
It is comparable to a mutual fund that can be bought and sold at a cost that varies throughout the day. The transactions are carried out in real-time as well.

Mutual Funds:
A professionally managed investment funds that trade in diversified holding are known as mutual funds. Funds are pooled from various investors and invested with the assistance of professionals. Bonds, stocks, money market instruments or a combination of all are part of the investment portfolio. The investor owns a share of the mutual fund and reaps the same benefits or losses as the other shareholders.
ETF shareholders get a part of the profits, i.e, the dividends paid and interest earned. They may also get a residual value if there is a liquidation of the fund. ETF shares are usually traded on public stock exchanges so these shares can be transferred, bought, or sold easily like the shares of a stock.

The key advantages of ETFs are as follows:
Investors can sell short or buy on margin. They can also purchase one share, as there are no minimum investment requirements.
The commission that is paid to the broker when buying or selling ETFs is the same as that paid for a regular order.
It is comparable to a mutual fund that can be bought and sold at a cost that varies throughout the day. The transactions are carried out in real-time as well.

The actual differences between mutual funds vs ETF:

1. Mutual Funds Exchange Traded Fund (ETF) Mutual Funds are traded at the closing net asset value. Exchange Traded Funds are traded during the course of a trading day and its value varies during this time. Mutual Funds have varying operating expenses. ETF has lower operating expenses. Most Mutual Funds have a minimum expense specified. There is no minimum investment specified for Exchange Traded Funds.

2. Mutual Funds have more tax liabilities than ETFs. ETFs offer tax benefits to the investors due to the manner of its creation and redemption. Mutual Fund shares can only be purchased directly from the funds at the NAV price that is fixed during the trading day. ETF can be bought and sold anytime on the stock exchange, at the prevailing market price. Generally, compared to ETFs, the transaction costs are zero when mutual fund shares are bought or sold. There is an additional cost involved while trading ETFs, which is called the “bid-ask spread”. Mutual funds vs ETF, whatever it may be, you have to first prioritize your demands.

3. Mutual Funds have lower liquidity compared to Exchange Traded Funds. ETF has higher liquidity since it is not connected to its daily trading volume. Usually, the time limit imposed on selling a share is 90 days from the date of purchase. ETF does not have a time limit on selling an asset. The investor can buy or sell at any point of the trading day at the price available during the time. Therefore, there is no minimum holding period specified for the same.

4. Mutual Funds are index-tracking but is actively managed by professionals. Assets are picked in such a way that it beats the index and achieves higher performance. Exchange Traded Funds track an index, i.e., it tries to match the price movements and returns indicated in an index by assembling a portfolio which is similar to the index constituents.

Mutual funds vs ETF debate have been going on for quite a time now, you have to choose which one is best for you according to your requirements.

Do check out our blog post on Top Life Insurance Companies in the United States

5 Ways to Save Money On a Budget

5 Ways to Save Money On a Budget: Saving money is indispensable especially when you are on a budget. It takes a little effort on your part and that effort might be the one worthy step you need to initiate in your fast life, the step that can make you save more for the other important issues or emergencies. It’s not at all easy to implement every little aspect of savings when you are already on a budget but making an effort is worth a try. Let’s see if you can add a sum to your savings and give yourself a pat on the back.

Here are some of the smart ways to save money on a budget:

1. Smart Shopping
Savings isn’t always about cash, you can save plenty by using certain smart shopping ways. Look out for all the offers at the commercial and retail stores and buy from the one that offers the least price on the things of your requirement. Look out for coupon codes and gift cards which will allow you to save a little at a time and remember, it will add up one day into something big. This is just a start.

2. Save Automatically
This is the easiest method of saving. You can set up an automatic savings fund which means a part of your salary will be deducted every month by your HR team and that amount will be automatically transferred to a savings account or any other permanent funds such as retirement account that you won’t be able to access as many times as possible giving you an ample amount saved for emergencies. Saving automatically is one of the most efficient Ways to Save Money On a Budget.

3. Emergency Fund
An emergency fund is a must if you have an average income and wants to save a decent amount in terms of emergencies. For e.g. you can save a minimum of $1000 in your savings account which can only be used in the time of need. The regularly scheduled payments in your accounts will keep the extra cash save and will add up an interest that will be fruitful in the future.

4. Purposeful Savings
It’s not always easy to save big when you have no further goals on spending them in the future. You can save more if you focus on a goal such as a vacation or for your kids’ tuitions and all. This will allow you to keep your focus on savings even little at times and trust me, it will all be worth it in the ned. After you are getting the ends meet on a budget, savings can add up and will also make you capable of spending less on things that are worthless. Having a purpose to save more is one of the fool proof Ways to Save Money On a Budget.

5. No Credit Cards
In a simple definition, a credit card is a money you don’t actually have. It makes things complex. It is the ultimate temptation that won’t in anyway help you save more and budget your savings. Start using debit cards and cash which will allow you to limit your spendings and save more.

Do check out our blog post on 5 Ways to Improve Your Credit Score.

How to Choose Best College Savings Plans in America

How to Choose Best College Savings Plans in America: A college is one of the paramount platforms in a student’s life that is bound to take them up on the ladder of success and fame. Getting an admission in the most reputed college is easy but the major problem arises when you are insufficient of funds to pay for the tuition fees and all your dreams and aspirations are shattered. While this may seem rather depressing, savings for college is not very much difficult. You just have to start with a minimum effort and save more eventually. You need to look up for a plan that will offer financial aids and will make you avoid the unwanted taxes.

One of the best options you can go for is a 529 Plan, which we can rather call as IRA’s for the college. They allow you to deduct the amount you have paid in the taxes from your total due similarly in the case of IRAs.

The government-insured plan allows your earnings to grow tax-free as well as if you are spending on the approved college costs with your plan such as books, tuition fees, rooms and other expenses, they will all be tax-free.

The plan doesn’t allow you to withdraw the money for non-educational purposes and if done so, will be taxable plus you will have to pay a penalty. The very first step you need to consider on How to Choose Best College Savings Plans in America is to avoid the 3rd parties and choose the directly sold plan that will allow you to save more money than pay commision to the third party.

The best plan to save for college is the one that charges lowest fund management fees and have a lesser impact on the aid as your child becomes less dependable eventually.

Two types of 529 plans to consider when focusing on How to Choose Best College Savings Plans in America:

1. Self Directed College Savings Plans
They allow you to save money by investing and that can only be used when the college admission date of your child is nearing. They have a limited number of investment options available to choose from and are generally based on the portfolios of your child. Once you start off with a heavy stock, they will shift you to bonds that can be accessed only when the time comes.

2. Prepaid Tuition Plans
This is another option you can choose from which allows you to pay for the child’s tuition fees in a particular college presently and not directly at the time of admission. It is only safe for those parents who know what kind of college their child will prefer to go and will get an admission at. Certain drawbacks of this option include trading the investment flexibility and trading the growth when you can invest and grow. You might be subjected to higher premium as compared to other 529 plan options.

Do check out our blog post on How to Get The Best Savings Account Rate.