I spent most of my life without a penny in savings, but learning how much I can earn with high-yield savings completely changed my approach – DIGIWIZ CENTRAL

I spent most of my life without a penny in savings, but learning how much I can earn with high-yield savings completely changed my approach

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The author, Chris Boutté.

Chris Boutté

I never understood the value of saving money — in part because I was living paycheck to paycheck.I’ve been wanting to get a tattoo sleeve, so I put some money in a high-yield savings account.Over the course of several years, I could make a huge amount of money in compound interest.

I turned 38 this year, and I only started saving when I was around 35 years old. Personally, I didn’t see the value in it, but if I’m being honest, I was also living paycheck to paycheck most of my life. I understand that many Americans believe they can’t afford to save, but once I realized how saving can make me money, I forced myself to start saving.

For years, I’ve wanted to start a tattoo sleeve, but it’s expensive to get tattooed by a decent artist. Back in October 2022, I found an artist I liked and he was booked out until summer 2023. I wanted to start with a half sleeve, and the quote was almost $3,000.

I’ve spent the majority of my life without a single penny in savings, but over the last few years, I’ve woken up and realized how ignorant I was to not take advantage of high-yield savings accounts. Now that I have my savings in one, it’s easier to achieve goals like starting my tattoo sleeve.

I didn’t know much about saving money

Once I started educating myself about personal finance that I discovered high-yield savings accounts. I used to think there was just one type of savings account. I also learned that it’s recommended that you have three to six months’ worth of expenses as an emergency fund. I immediately understood the importance of this due to my history of losing jobs.

By not using a high-yield savings account, I was leaving free money on the table. Today, it’s a tool I use to make money before large purchases and expenses while also acting as an emergency fund.

Basically, high-yield savings accounts pay out a higher percentage than normal savings accounts by simply storing your money at a certain bank. Banks want you to save money with them because they don’t always have cash on-hand for loans, which is how they make money. They’re basically paying you to borrow money that they can then lend out for a higher interest fee.

I found a high-yield savings account that meets my needs

The first thing I did was start researching high-yield savings accounts to see who paid the most. All this required was a quick Google search for “best high-yield savings accounts.”

Today, some banks offer APYs as high as about 5.5%. Personally, I opened an account with the same bank where I have my cash back credit card and my car loan, so it’s super convenient even though my APY is slightly lower than that at 4.3%.

Not only was there no minimum deposit, but there are no fees with this account, unlike some other banks. What really surprised me was how the big banks like Bank of America, Wells Fargo, and Chase actually pay some of the lowest APYs.

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Compound interest will let me grow my savings

Right now, my account pays 4.3% APY, which means that for every $1,000 I save in the account, I get $43 for free. They pay out monthly, so for every $1,000, interest payments are roughly $3.58. But due to compound interest, I’m making money off of the interest they pay me as well.

Using a compound interest calculator, if I deposit $5,000 and add $100 per month for five years, I’d make $1,710 in interest and have a total savings of $12,710.

Within about four or five months, I had $3,000 in my high-yield savings account, and the entire time, I was making 4.3% interest on that money.

I’m saving money on my tattoo

In addition to building an emergency fund, my girlfriend and I also use our high-yield savings accounts for large expenses and purchases, like the money I’ve been saving for my tattoo sleeve.

If I just kept that in cash, I’d make nothing from that money sitting there. And if I chose to keep it in a regular bank account, I’d make next to nothing. Because of my interest payments, I basically got a discount on my tattoo.

After my girlfriend graduated with her master’s degree in the summer of 2022, she had $10,000 in cash left over from her student loans. Due to the pause on loan payments, I convinced her to open a high-yield savings account to store that money until she had to make payments.

Since opening the account earlier this year, she’s made hundreds of dollars in interest for simply holding her money in that account. Now that extra money can help make her loan payments.

I’m 38 years old, and I regularly kick myself for not educating myself about this sooner. Even when I was making far less money, there was no excuse to not deposit $20 a month when I started working at 18. Fortunately, I have a 14-year-old son, and I can teach him so he doesn’t make the same mistakes that I did.

Read the original article on Business Insider
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