When I was but a wee little thing, my mom took me down to the local branch of our regional bank and helped me open a savings account. We deposited my birthday money from Grandma, and I was told in no uncertain terms that I would thenceforth deposit half of my $2 a week allowance into the account (the other half went into the basket at church… a fact about which this apostate is still a little bitter).
Then Mom and the bank clerk told me of the wonders of my new savings account. “It’s a safe place to keep your money while you’re saving up for something like a car!” they said. “Plus, it earns interest.”
Interest, as you know, has the ability to work for you and for the forces of darkness in equal measure. You want your savings and not your debts to earn interest. So having a savings account is a great way to lure the vicious specter of interest to your side of the financial war.
I was all excited to check my balance and see how much interest I’d earned after a few months of dutifully depositing half of my allowance. But alas…
Baby’s first savings account wasn’t accruing jack shit in the way of interest. This is because most brick-and-mortar banks offer savings accounts with dismally uncompetitive interest rates.
I was facing an APY (annual percentage yield) of 0.01%. That’s… almost literally nothing. Which meant my savings weren’t even going to keep up with inflation if I trusted to the false promise that interest would help grow my savings.
Enter the high-yield online savings account.