How We Do It: High Yeild Low Risk Accounts

photo credit: Patrick Hoesly

If you are new to the series and you want to read the beginning of the story, see HERE.

This is a topic I still don’t know a ton about, but I feel like I know enough about them to tell you that they are very helpful if you have money that needs to sit and be accessed at any time.  High Yield, Low risk Accounts are great for putting things like you Emergency fund into.  The account gets a slightly higher return on them because there is no guarantee on the interest you receive, but there is very low risk in them because you aren’t going to loose any money in the process either.

Money Market Accounts are Low risk Accounts.  They aren’t insured by FDIC, but they also don’t take your money and put it all into stocks so you may loose the money if the stock market drops.  So this makes then them low risk.  They do however use the stocks to make you money.  This makes the interest rate on them move, so you are able to earn a high yield on your money without the risk.  But it also means that you may have times where you don’t make much more then a savings account would.

This means that you would not want to use this type of an account as a money making account, you would want the account just to hold your money while you wait for it to be used.  One of the benefits of money market accounts is that you are able to use the money or move the money at any time without a fee or penalty.  So even you have your emergency money in them, you are able to get it out so you can cover the costs of the emergency.

We have 2 of these accounts.  One that holds our emergency savings of 6 months of expenses and another that we use to save money for certain purposes.  This account was our car savings account before we bought our car.  We don’t make a huge amount each month with these accounts.  but we make slightly more then we would if it were a savings account, so we like to have them.

Not all banks offer these accounts, so be sure you check with your bank.  If they don’t offer them, I woudl suggest using a reputable bank online that you trust.  You don’t want to be worrying about your money when it is your emergency money.  try asking around to others and see where their money is if you are needing some help in finding a bank that offers them.  Like I said, you want to trust where your money is being saved.

Do you use High Yield, Low Risk Accounts? What type of an account do you have?