Return of the high-yield savings account (and why you should open one)

Inflation is a fact of life in modern economies, and it causes the purchasing power of cash to decrease over time. For example, if you saved $1,000 in 1993, your money would have lost just over half of its purchasing power by 2022, being worth only $479. That’s losing half of your original money’s value in 29 years.

Inflation acts as a punishment against people who save money in cash, and it’s a problem that needs to be addressed by anyone who wants to be financially secure.

This is one reason why much financial advice centers around investing in the stock market (such as in your 401K or IRA). However, people still need cash in a bank account — money that’s immediately available and not subject to the ups and downs of the global economy like stocks are.

People need cash on hand for daily purchases, enough cash to serve as an emergency fund, and perhaps cash for short-term goals (such as a car fund or travel fund).

A high-yield savings account can prevent your money from losing purchasing power to inflation (or at least minimize the loss to inflation).

What is a high-yield savings account?

It’s a savings account — the same kind that your current bank has — but these accounts are at banks that have few or no physical locations. Instead, these banks are mostly online.