In this episode of the Money Clarity Podcast, Lindsey Ciarrocca breaks down what a high-yield savings account (HYSA) is, why it can be worth using, and what bank is her favorite.

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YNAB Disclosure: I am a YNAB Certified Budgeting Coach, which means that I have been trained to coach people on using YNAB software and the YNAB budgeting method. I have met select requirements of You Need a Budget LLC in order to receive this certification, which means that I have the ability to competently coach YNAB to others. I am not an employee of YNAB, and all non-YNAB related opinions and recommendations are my own. My views do not reflect the views of YNAB and its employees or affiliates.

Hello, and welcome to another episode of the Money Clarity Podcast.

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Today we are diving into high yield

savings accounts, so we're gonna talk

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about what is a high yield savings

account, why you should consider one.

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What are some of the benefits

to high yield savings accounts?

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Even though as you know, my favorite

budgeting software is YNAB and they teach

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you to just use one checking account.

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So what are some of the

benefits to having this?

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And then also downsides to

having a second account linked

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in YNAB and stay till the end.

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And I will share with you my favorite

high yield savings account that I have

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been using for more than 10 years.

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If we haven't met before.

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Hi there.

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My name is Lindsay Ciarrocca.

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I'm a YNAB certified coach

and a certified money coach.

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And my goal is to help you take control

of your money so that you can live your

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greatest life with clarity and confidence.

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And, uh, along the way, I

hope to help you learn to love

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budgeting just as much as I do.

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All right, let's start with the basics.

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What is a high yield savings account?

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A high yield savings account, or you'll

likely see it abbreviated as HYSA.

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Is just like a regular savings account

at your local bank, but the main

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difference is the interest rate or

how much money they pay you to have

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your money sitting in this account.

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So a traditional banks usually

give you less than a quarter

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of a percent, so 0.25%.

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Usually it's honestly closer to 0.01%,

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which is basically pennies and.

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While I love picking up a penny off

the ground and do not discount pennies,

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there is a better option that you can use

and that is a high yield savings account.

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Because the interest rates on

those currently are around 3.5%.

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So essentially you're getting free money

for just letting your cash sit there.

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So what is this interest rate based on?

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Interest rate is actually based on

something that the Federal Reserve sets

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called the federal funds rate, and this is

the interest rate that banks charge each

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other for lending their money overnight.

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Not really anything you need to know, but

can be helpful background information.

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So basically , if you hear on the

news about the Fed raising rates.

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That means it's becoming more

expensive to borrow money.

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So things like your credit card

interest might go up, you will

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likely see mortgage rates going up

eventually, but that also means that

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the interest rate on your savings

account is gonna go up or can go up.

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Um,

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so what does this translate to in.

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Actual dollars.

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So currently the rate on my traditional

savings account is actually 0.25%,

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which I was kind of surprised by.

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So in that case, if I have $100 in

my bank account, I would earn 25

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cents for the year for that $100.

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Whereas if I had it in.

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High yield savings account earning 3.5%,

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I would earn $3 and 50

cents over that 12 months.

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And while that doesn't sound like a

lot of money, once you start to grow

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your savings, and if you're using

YNAB, the way the way I teach it, and

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the way the software is meant to be

used, where you're starting to set

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aside money that you're not using

for a few months at a time, right?

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So if you're planning for your

true expenses and setting aside.

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Money for an expense that's six, eight,

even 12 months down the road, that

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money's just going to be sitting there.

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So wouldn't you like to earn a

little bit more on it than 0.01%

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or 0.25%?

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So imagine if you had a thousand

dollars in money that is

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waiting for jobs down the road.

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Now you're earning $35 per

year versus $2 and 50 cents.

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Again, not life changing amounts,

but it compounds over time.

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So if you get up to the point where

you have $10,000 in that account,

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you're earning $350 a year for just

letting that money sit there versus 25.

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And I don't know about you, but

I am totally willing to take 350

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free dollars from the bank just for

letting me have my money sit there.

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Right?

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Seems like a no-brainer to me.

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So those are the basics of a

high-yield savings account.

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And why you consi should consider one

because they obviously just pay you

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more for letting your money sit there.

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But if.

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You're in the YNAB world YNAB teaches

one account, one single checking

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account, and honestly, that is

the way to start in the beginning.

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It is more simple.

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It is the simplest way to start is

just to have one single checking

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account linked to your YNAB account.

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The reason for this is it just

adds a layer of complexity to be

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transferring money between accounts,

between your regular checking account

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and your high-yield savings account.

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Because in the YNAB world, YNAB

doesn't care where the money is.

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So if you have $200 in your checking

account, but you have a thousand dollars

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in your high yield savings account,

but then you go to look at your budget

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and you have $600 to spend on a home

repair, if you go to try to spend that

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money out of your checking account.

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You don't have enough in there.

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So it just adds a layer of complexity,

which honestly is not worth it in the

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beginning when you're just getting

started and just trying to get a handle

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on the whole YNAB system and how it

works So I still recommend just having

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one account when you're getting started.

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However, once you start to

get into the YNAB habit, once

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you're starting to see your.

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Checking account balance

consistently creep up.

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Maybe now you're sitting there and it's

been a year or two and you're like, oh,

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my checking account just kind of regularly

has two, three, $4,000 sitting in it.

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This is actually what happened to us.

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I got to the point where we had

six or $7,000 just sitting in our

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saving, in our checking account,

and I was like, that money could

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be earning more money elsewhere.

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So that is the benefit

to having that account.

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So again, it creates that layer of

complexity and you do have to pay a

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little bit more attention, and you

do have to make sure that you're

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transferring money back and forth.

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But when you're earning $350 a year

versus $35 a year, it definitely

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could be worth considering.

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Okay, so the last thing I wanna share

with you today is one of, is my favorite.

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Bank account that I have been using for

more than 10 years, which is where I have

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all of our high yield savings accounts.

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And that bank is Ally and

they're an online only bank.

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So there are no brick and mortar

institutions that you can walk into.

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But that's one of the benefits.

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That's one of the, the reasons they're

able, able to offer a little bit of

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a higher interest rate is because

they don't have as much overhead.

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So, like I said, I've been banking

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2013, and have always had high

yield savings accounts with them.

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So it can connect to your

regular bank account.

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Just like as an online transfer,

it might take a day or two to move

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the money in between accounts,

but it's still your money.

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You still have access to it.

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With Ally, you can also

have a checking account.

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So the checking account, it

is just like your normal one

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where it doesn't have a lot of.

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It doesn't have any, doesn't have a lot

or if any interest associated with it.

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But you could quickly, you could

instantly move money from your

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savings to your checking and your

checking account can come with a

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debit card and checks if you need it.

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So then you have instant access to it.

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Otherwise, you just need to plan

a little bit ahead and move money

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to your regular checking account.

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But this is where I move money

every single month for things

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like our emergency fund.

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Our property taxes that

are paid twice a year.

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Things like travel savings.

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You know, we put several hundred dollars

into our travel category every month.

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I put that in there, but we're

not spending it every month.

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So that just gets to sit in a

high yield savings account and

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earn just a little bit more.

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. I do have an affiliate link for Ally.

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It is the exuberant elephant.com/ally,

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which is spelled a LLY.

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And if you use my referral

link, you could earn up to a

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hundred dollars welcome bonus.

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So I'll leave that link in

the show notes for you below.

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But again, remember if you're

just starting out, don't

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worry about this for now.

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Just get the hang of YNAB, figure

out how it works and get it to make

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sense for you so that you're using it

consistently and that you're consistently

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putting money into those categories

and letting that money start to build.

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All right, so there you have it.

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There are your basics of a

high-yield savings account.

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Like I said, abbreviated HYSA.

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So if you ever see that, that's what that

is, and it's just like a regular savings

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account, except the bank is paying you

more money to have your money there.

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So.

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Free money is always a great thing, right?

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Again, one downside being that it adds a

layer of complexity to your YNAB budget.

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So I don't recommend it until you

get to that stage where you're

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completely comfortable with YNAB.

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But once you do again, now if you have

money that's sitting around for 6, 8, 12

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months, it's earning you just a little

bit more One other fun tip is that I like.

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To take that interest

that we earn every month.

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So when it comes in, just

like a transaction, so it gets

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assigned as ready to assign.

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So it's new money coming into our

account, and what I do is I immediately

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assign that to whatever my priority is.

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Right now it's we're paying off a

student loan, so I take that in the last

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month, I think we got 70 some dollars.

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So I take that 70 some dollars

and assign it to the student loan.

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Again, this can be confusing because

you're thinking, wait, that money

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is in the the savings account, but

I need it in the checking account.

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Again, it doesn't matter in the YNAB

world, so as long as you have money

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in your checking account where you

need it, when the time comes to pay

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the thing, it's totally fine, but so

that's just a fun little trick to be

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able to chip away a little bit more

at your debt or if you want to beef

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up your savings in a certain way.

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You know, just every little dollar that

comes in, you get to add it to a category.

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Because remember, YNAB rule number

one, every dollar gets a job.

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All right.

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So those are my tips for you about

saving in a high-yield savings account.

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All right, if you are just getting

set up with YNAB, and this is a

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little beyond what you're looking

for right now, totally fine.

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I have a free YNAB category set

up guide and template for you.

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Go ahead and download that.

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. You'll find that at

theexuberantelephant.com/ynab-setup.

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Of course, that link will be in

the show notes for you as well.

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So go ahead and grab that if you're

just getting started or go ahead

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and check out Ally through my

affiliate link in the link below.

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Alright, thanks so much for

joining me on another episode

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of the Money Clarity Podcast.

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And remember, your biggest,

wildest dreams are within reach.

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Let's go make some money moves

so that you too can start to

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experience financial freedom.