- David Prado Perucha/Shutterstock
- Robo-advisor Wealthfront offers a high-yield account that can help you earn 2.32% annually on your savings.
- The account is FDIC insured up to $1 million, fee-free, and requires a minimum opening deposit of just $1, making it accessible to all savers.
- We did the math to find out how a $1,000 initial investment, plus additional contributions of $100 a month, would grow at the current interest rate over five years.
- Currently, Business Insider readers who sign up for a Wealthfront investment account will receive their first $5,000 managed for free in that account in perpetuity.
The main objective of a savings account is to keep the money you’re not using today safe and accessible. If you choose an account earning at least 2% in interest, you have a shot at beating inflation to grow that money into even more.
Dozens of financial institutions have high-yield savings accounts on offer, but investment app Wealthfront’s Cash Account is currently leading the pack with one of the top APYs: 2.32%. While technically a cash account, Wealthfront’s account has the same features as a high-yield savings account.
Not only does it earn 25 times more than your typical savings account, but Wealthfront’s Cash Account is fee-free, requires a minimum opening deposit of just $1, allows unlimited transfers, and is FDIC-insured up to $1 million. True to its roots as a robo-adviser, Wealthfront’s Cash Account can only be accessed online and through the mobile app.
Wealthfront debuted its Cash Account earlier this year with a 2.24% APY and had been steadily increasing it, reaching a high of 2.57%, until the Fed announced a benchmark interest rate cut of 0.25% at the end of July.
Wealthfront recommends its cash account for storing money that’s going to be used within five years, whether an emergency fund, down payment for a home, or an upcoming expense. For longer-term growth, you can use Wealthfront’s investing platform to invest in low-cost index funds with as little as $500, set up and contribute to an IRA, or save in a 529 college plan.
To see how an initial deposit of $1,000, plus monthly contributions of just $100, could grow over five years in Wealthfront’s cash account, we plugged the numbers into the compound interest calculator on Investor.gov. Wealthfront doesn’t offer a checking account, but you can easily set up automatic transfers from another bank to contribute to the high-yield account regularly.
Below, you’ll see the beginning and ending balance each year, along with the total additional contributions made throughout the year. Note that the interest on this account is compounded monthly.
- Yutong Yuan/Business Insider
Also note that the calculation assumes a constant APY of 2.32%, though it’s unlikely this would remain the same over five years since interest rates are subject to change depending on inflation and the government’s interest-rate benchmark.
Choosing the account with the highest interest rate today is a fine decision, but know that the rate offered when you open the account isn’t locked in. In short, ensure the account otherwise fits your needs before parking your savings there.
Across the board, high-yield savings accounts offer better rates than a traditional savings account – hence: high-yield – so you’ve already made progress toward automatically building wealth by keeping your money there, regardless of how the rate shifts over time.
- Read more:
- Robo-advisor Wealthfront now offers a new high-yield savings account with a minimum deposit of $1 – here’s how it stacks up
- Ally vs. Marcus vs. Wealthfront: How 3 of the most popular high-yield savings accounts stack up
- American Express has a high-yield account to earn 20 times more on savings, and anyone can open it for as little as $1
- Wealthfront and Betterment are battling it out, and it’s great news for savers