How I Save More Money Each Month, Passively

A high-yield savings account is one of the best ways to save money each month. And for many reasons. It’s passive, which means you don’t have to trade your time for the money (i.e. getting another job). It’s not investing, which often has a heavy learning curve if you’ve never invested before. I’ve had a high-yield savings account for a few years now and each month, I am earning money on the balance that I leave in the account.

But I have also been contributing more because as I make more, I want to save more so that I can eventually live off my savings and investments. Until then, I continue to use it to save for future investment purchases as well as my emergency savings. However, I've seen people use high-yield savings for many other things such as a car, a vacation, or a big purchase that doesn’t fit into those categories.

In this post, I’m going to break down:

• What a high-yield savings account (HYSA) is
• Is it worth it to open a high-yield savings account (i.e. the benefits)
• How long you should leave money in a high-yield savings account
• How I make money off a high-yield savings account (my Jan-Feb 2023 review)
• How often Marcus by Goldman Sachs pay interest (the account I use)
• What a high-yield certificate of deposit (HYCD) is (and how it differs from a high-yield savings account

What is a high-yield savings account?

A high-yield savings account (HYSA) is very similar to a traditional savings account that you will find at any major financial institution. The difference is solely in the annual percentage yield (APY) which is similar to interest. This percentage reflects what you have the opportunity to earn by letting the bank hold your money.

Usually, these major financial institutions offer very low APYs (think 0.005%) which means that your money is earning pennies on the dollar. However, with HYSAs, you can earn APYs as high as 4% and allow your money to earn MORE money for you. 

So imagine this: you have $5,000 in savings and the average financial institution’s savings account is 0.10% APY. You would earn just $5 over the course of a year. But if you put that same $5,000 in an account earning 2 percent, you'd earn $100. A savings account major hack.

Is it worth it to open a high-yield savings account (HYSA)?

Absolutely! I’ve been screaming about this for the last couple of years. We all work very hard for our money and it’s very important to save for anything that could happen. My preferred way to save is with a high-yield savings account because it’s hands-off (meaning I don’t have to log in and manage my account like an active investment), it doesn’t impact any of my other investments (because it’s not an investment, it’s a savings account), and it allows me to earn more money than I could have for simply saving my money in a bank like I would have done anyways.

I earned $564 in interest last year which I would not have earned in my traditional savings account. That money was accumulated via compounding interest and I leave it in the account until I need it so it can continue to grow. So if you’re wondering if you can make money off a high-yield savings account, there’s your answer.

How long you should leave money in a high-yield savings account?

This is at your discretion. I’ve assigned my dollars responsibility. I have a certain amount that I contribute to emergency savings, I have a certain amount I put aside for travel expenses, and I have a certain amount for future investments (real estate and stock market). If I don’t need the money, I leave it in the account so it can continue to grow.

The more money I leave and continue to deposit into the account, the more I earn. A balance if $30,000 is going to provide more interest than a balance of $5,000.

How I make money off a high-yield savings account

My money comes from the interest that my money earned. As of March 17, 2023, the annual percentage yield (APY) is 3.75%. This means that my $10,000 balance has an opportunity to earn 3.75% in interest on that amount. Imagine if it was higher!

The APY is variable though, meaning that it changes according to what’s happening in the economy. But since 2023, it’s been consistently trending upward. I actually earn 4.75% because I am referral partner. I told you i’ve been talking about this for a while! I’ve encouraged many of my people to sign up so that they can get an additional 1% APY on whatever is advertised. That takes the APY from 3.75% to 4.75%.

For January and February, i’ve earned $258 dollars in interest. I’m earning more and more quickly because of the increasing APY and the increase of deposits I’m making in the account. It’s basically another passive income stream that I don’t touch!

How often does Marcus by Goldman Sachs pay interest?

The interest is paid out monthly. You can log in to your account to see it, but they’ll also issue a statement that has the information.

Marcus is also very good with informing you of when the APY changes on a high-yield savings account. As of lately, it’s only been going up.

What is a high-yield certificate of deposit (HYCD) and how it differs from a high-yield savings account?

A high-yield certificate of deposit (HYCD) is basically a high-yield savings account but with two major differences:

It’s a fixed APY for however long your term is.

So let’s say you sign up for a 6-month rate term and the APY is 4%. That means that you will consistently get 4% in interest every month for 6 months. It doesn’t matter what the economy is doing. This is based on the balance you leave in the account. The more you leave, the more opportunity you have to earn more money.

You cannot withdraw money without penalties

Unlike a high-yield savings account (HYSA) which allows you to withdraw money whenever you need it, a high-yield certificate of deposit (HYCD) has early withdrawal fees. It’s like signing a contract and not adhering to the rules.

When should I use a high-yield certificate of deposit (HYCD) vs. a high-yield savings account (HYSA)?

It’s best to use a high-yield certificate of deposit (HYCD) if you want to put money away for at least 6 months. If you take it out before then, you’ll have to pay - which defeats the purpose. So for example, if I knew I wanted to buy another home in 12-15 months, I would open a high-yield certificate of deposit (HYCD) for 12 months because it’s a place where I can save for my down payment and earn a fixed APY that never changes. So I’m guaranteed that 4% APY on whatever balance I leave in the HYCD.

On the flip side, if I wanted to buy a home in 6 months or less, I would opt for a high-yield savings account because I can access my money without penalties. The downside is that the APY will likely change but I would just hope that it’s going up. It did go down during the start of COVID-19 but so did the rest of the economy. Nothing was certain then and that’s a great indicator that your accounts may suffer.

Check out my YouTube video where I dive even deeper into benefits of both and when to choose which.

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