Hello friends,

I'm hoping to learn from you today Can someone explain to me how this whole HYSA works? I am still new to investing so I haven't really looked into this account yet. I have my 6 month emergency fund sitting in my Bank's savings account earning shit and I want to start earning more. My emergency account is sitting around $8k right now (my monthly expenses are low)

Questions:

1. How do I look up rates?
2. Once I find a good rate, how do I open a account?
3. How is my money protected?
4. How often does rates go down?
5. What institutions are good to look at for a HYSA?

Sorry for the newbie questions, still trying to learn as much as possible

I can only tell you what I am doing.

As for finding them a web search is your friend.

https://www.nerdwallet.com/best/banking/high-yield-online-savings-accounts

You are probably not going to be able to "chase" rates on a saving account though since you would be setting up and closing accounts constantly.

If you want to chase rates then you would probably be better off having a brokerage account and just churning 30 day CDs.

I churn some CDs in a 1 month to 1 year ladder but I also have a HYSA from AMEX and I also bank with them.  They don't have the absolutely highest rate but they are fairly competitive and it is convenient to move money between checking and savings if they are the same bank.

Plenty of other banks have similar programs and I get emails from them pretty regularly, at least those I already have a credit card relationship with now.  

The algorithm they use for their interest rate should be posted somewhere but the actual rate fluctuates up and down.  I never pay attention to when it moves up and down but I get emails telling me when the rate goes up but never when it goes down.

Setting one up is easy.  Just apply for the account and follow the instructions for transferring money into it from an existing account.  

I am fairly certain the accounts are protected up to the FDIC limit of $250,000  

I would look at savings rates at institutions you already have accounts at.  They likely have rates posted on their website.  1 place I have an account has a 4.25% savings account so I moved some money into an account there.  Some other money my wife has at another bank was just sitting in a checking account.  I drove over there and moved it into a 5.25% CD.  Just look at your banks and see what they offer.

I park cash in Ally bank.  It isn't so much my emergency fund, but it is what I am using to renovate my shack.  It is easy to move back and forth to my Chase account to pay for things.  Both accounts are tied, and I can see the Ally balance with my Chase log in.  


Ally is usually between 4-5%. I let these funds sit in a no yield saving account for a couple years.  Don't do this.

New roof a few weeks ago.  Shack is on third day of painting, should be done today, and then new gutters.  I am fucking hemorrhaging money.

Ally is FDIC to $250K per account.


$8K isn't much, pump those numbers up!!!!

5.25%

https://www.cfg.bank/personal-banking/personal-deposit-rates/

A HYSA is not an investment, but they do offset (a little) the impact inflation.  They typically work like any other savings account, but there may be a limit on the number of withdraws you can make per month.  

1. How do I look up rates? - https://www.bankrate.com/banking/savings/best-high-yield-interests-savings-accounts/

2. Once I find a good rate, how do I open a account? - Go to the bank website.  You can usually open an account online and transfer funds out of your current bank account.  

3. How is my money protected?  - An FDIC member bank has insurance of up to $250,000 per account for the case the bank fails....the full faith and credit of the US gov has your back bro.  Also, you need to use good practices with passwords and use the bank's security features such as two-factor authentication.  

4. How often does rates go down? - Bank rates will vary with the Fed rate changes.  Some institutions move faster than others, but they all will go up and down with the Fed.

5. What institutions are good to look at for a HYSA?   Do some research and go with an institution whose name you recognize and one that has a nice/easy to use website.  I would not chase the highest rates with no-name or small online only banks.  Be sure to look at minimum balance requirements and make sure there are no maintenance fees. Don't be afraid to ditch them if you don't like something or if the rates are no longer competitive.  I also like banks that make it easy to transfer funds OUT to other institutions......For example, transfer an amount from the HYSA to my checking account at a different bank.   That should be easy with no fees.  

If you are one that runs into trouble and problems at every turn.....you might focus on what is local to you.  For example, a local credit union might have CDs that would pay better than a HYSA.  CDs do typically have a penalty if you cash them in early.....but with the ones I've seen you can get your money at any time if there is an emergency.  Or you might be able to find a decent (maybe not the highest) HYSA rate with a bank or credit union that has local branches.

The above is not financial advice....just some thoughts.

I’d go with fidelity.  Everything you are going to find will be paying around 5% interest, so you’re talking $400/year on $8k, or about $35/month.  
It’s not worth moving money around for 0.1% extra interest and giving up the ease and flexibility of fidelity or vanguard.  

Rates will go down when the fed lowers interest rates.  If you use fidelity or vanguard then when rates do go down you’ll have other options available just a couple clicks away and not have to deal with new accounts, moving money around, etc.  

Fidelity or vanguard will have many account types to choose from and other benefits as well to make your financial life simpler.  Retirement and brokerage accounts, credit cards, debit cards, and anything else you can imagine.  

I looked on Fidelity and didn't see any HYSA? Which account are you taking about?

Fidelity isn’t a bank so they don’t have checking or savings accounts.  

For 5% interest on cash you’d likely want a standard brokerage account.  It’ll have an account/routing number so you can ETF money to/from your local bank or anywhere else whenever you need to.  

If you do it, for every account you can select your “core position” which is where your cash balance is kept.  I believe most accounts default to cash or similar with a low interest rate.  You would need to change it to spaxx which is Fidelity’s money market fund that pays 5%.

https://www.fidelity.com/open-account/all-accounts

Fidelity has a Cash Management account that operates somewhat like a checking account, gets you a debit card to use, connects to your brokerage accounts/IRAs, and offers 2.7% interest right now. https://www.fidelity.com/spend-save/fidelity-cash-management-account/overview

Or, you can just open an individual brokerage account there, or Vanguard or wherever, and park money in the default settlement funds, which are money market funds earning ~ 5% or more.

So with these money market funds. Would you lose money if the market goes down?

I already have a Roth IRA & HSA with Fidelity so doing a brokerage would be ideal since my local bank doesn't offer a HYSA.

Some reading about the CMA for you here: https://www.bogleheads.org/forum/viewtopic.php?t=421856

And MMFs, here: https://www.fidelity.com/mutual-funds/mutual-fund-spotlights/money-market-funds

I think SPAXX is the default settlement fund for a Fidelity brokerage account.

No you don’t lose money.  The rates will go up/down based on the fed rate though, no different than any other cash account.  

Thanks, will read later when I have some free time
Thanks