Savers Can Earn Better Returns with Online Savings Accounts
These days, you have the opportunity to earn better returns on your savings than ever before. Thanks to a series of interest rate hikes by the Federal Reserve, top-yielding online savings accounts now offer rates of more than 5%. Moving your money to a high-yield savings account is an easy way to make extra money without much effort. Greg McBride, Chief Financial Analyst at Bankrate.com, emphasizes the benefits of this strategy.
The Rise of Cash Stuffing
A new budgeting trend called “cash stuffing” has gained popularity among young adults after going viral on TikTok. The concept is simple: you divide your spending money into different envelopes that represent different expenses like groceries and gas. When the cash in one envelope is spent, you either stop spending in that category for the month or borrow from another envelope. While cash stuffing can help you stay on budget and exercise discipline, it is not without its downsides.
The Downsides of Keeping Cash
Stashing cash at home means forfeiting the protections that come with consumer banking, and it also leaves you vulnerable to theft. Unlike banks, which are covered by the FDIC and insure your money up to $250,000 per depositor, per account ownership category, your home insurance policy may not cover you in case of burglary. Additionally, keeping cash means missing out on the opportunity to earn up to 5% interest on your savings. Matt Schulz, Chief Credit Analyst at LendingTree, advises against relying solely on cash when higher returns are available through high-yield savings accounts or other investment options like Treasury bills or certificates of deposit.
Seek Credible Financial Advice
When it comes to financial advice, it’s important to rely on credible sources. Avoid getting advice from social media platforms like TikTok or Instagram and instead seek guidance from reputable organizations such as the National Foundation for Credit Counseling or the Consumer Financial Protection Bureau.
Hot Take: Make the Most of Your Savings with Online Accounts
While cash stuffing may be a popular budgeting trend, it’s important to consider the downsides. By keeping cash at home, you miss out on the protections offered by consumer banking and the opportunity to earn higher returns through online savings accounts. With interest rates on these accounts exceeding 5%, it’s a smart move to make the most of your savings by taking advantage of these competitive rates. Seek credible financial advice from trusted sources to ensure you make informed decisions about your money.
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