Although it may seem secure to keep your money in a checking account, the reality is that your dollars lose value over time if they are not growing. Inflation causes prices to rise as companies hike up prices due to increased expenses and demand, and the government spends more, increasing national debt. All these factors contribute to the depreciation of currency if it’s not growing. As you age, you will understand the importance of keeping pace with inflation. Even before the recent economic disruptions, inflation was on the rise, making goods and services more expensive over time. Real estate serves as a hedge against inflation, as property prices usually increase annually. While it carries risks, owning a home can help you combat inflation.
To keep up with inflation, consider high-yield savings accounts. Many offer Annual Percentage Yields (APYs) exceeding the inflation rate. With APYs ranging from 2.00% to 4.00%, these accounts can provide a substantial return on your savings without locking your money into a CD. A high-yield savings account can earn you $200 to $400 in interest per year on a $10,000 deposit, which increases with additional deposits.
High-yield savings accounts are a safer option compared to stocks and real estate, as they are FDIC-insured, protecting your funds up to $250,000. Your account balance remains stable, with interest accumulating. However, remember that the interest earned is considered ordinary income, subject to income tax rates, potentially lowering your effective yield.
Before selecting a high-yield savings account, examine the additional features and products offered by the financial institution. Consider whether they provide loans, credit cards, or other services that align with your financial goals. Review all aspects of the bank to ensure you choose the right institution for your high-yield savings needs and financial well-being.
Goals that are planned for the future and are aimed at achieving desired outcomes in the distant future are referred to as long-term goals.
