Marcus High-Yield Savings Accounts (HYSA) Giving the Highest Return Since Pandemic

This post may contain affiliate links. Please see my disclosure to learn more.

Wow! It’s finally happening! High-yield savings account rates are up. Today, we are seeing the highest return since the pandemic in 2020. Marcus HYSA (high-yield savings account) are at 2.5% but my readers get an additional 1% APY bonus if they sign up through my link here. That means that by signing up today, you can secure 3.5% rate of return on your savings for the first 3 months. I wrote about what HYSAs are here, but I thought I would provide an explanation as to why I this is the perfect avenue for short-term savings in today’s post.

HYSAs are low risk investment options for short-term savings:

HYSAs are low-risk investment options for short-term savings. How is this different from the stock market?

I like to use the stock market for my buy-and-hold strategy. Because of fluctuations in the market, the value of my investments could go up or down any day. The only way to beat the market is to buy and hold long-term. Historical data has proven that staying in the stock market for a long period of time is the best strategy.

The stock market’s volatility also means that I would not want to keep my short-term savings in it. Short-term savings refer to money that I am saving up for a particular event. In my case, my short-term savings was for the resumption of student loans. With the student debt interest rate at 0% since the pandemic started, we had decided to put our savings in a HYSA to earn interest on it over time. Unlike the volatile stock market, this rate of return is guaranteed, and can not go negative.

Examples of short-term savings:

Saving for a house
Saving for the birth of a baby
Preparing for student loan repayment to resume
Saving for next round of school tuition
Saving for an emergency fund
Saving for a wedding
Planning a trip/travel
Buying a new car

Why are HYSAs better than a savings account?

Savings account at other banks have a much lower interest rate. For example, I do my banking with Chase bank and at the time of writing this post is 0.01%. Compare that to 3.5% that you get by using my referral sign-up bonus! That means that if you have $10,000 in your savings account, you will earn $1 from Chase, and $350 from HYSA every year. That’s a no-brainer for me.

Why choose Marcus for your HYSA?

Marcus provides a return rate that is 4x the national average. It also is FDIC-insured for up to $250,000. That means you can put your savings here to rest without worrying about the value going down. Marcus in particular is backed by Goldman Sachs, a long trusted company. They also have same-day transfers up to $100,000 to and from most banks. This means that your money is readily available should you need it.

Would it be better to pay off credit card debt or save in a HYSA account?

While HYSAs are perfect for short-term savings, I think it is always better to pay off credit card debt first. The reason is because credit cards charge an interest rate much higher than what you would earn by stowing away dollars in a Marcus HYSA. That being said, if you struggle with credit card debt, may I recommend The Credit Pros and their expert services? (*aff) Paying off credit card debt was the first thing we did on our student loan repayment journey, and it was the thing that catapulted us forward towards financial independence. I highly recommend!

Photo by Konstantin Evdokimov on Unsplash

This post may contain affiliate links. Please see my disclosure to learn more. A friendly reminder that this is an opinion piece written by yours truly and should not be considered professional financial advice.

Why You Should Always Cash Out Your Venmo Account

This post may contain affiliate links. Please see my disclosure to learn more.

I recently became aware of the fact that people keep funds in their Venmo accounts. I was shocked. From a finance perspective, this is a terrible move, keeping your money locked away for someone else’s use. By keeping money in a Venmo account, you are funding Venmo’s ability to fund others. I’m sure Venmo is happy. But your future self won’t be when you realize why this is bad for your financial life. So I decided to write a post about why we should always cash out our Venmo accounts. But first, a bit about my philosophy around money.

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I like to think of money as our life energy. We spend time and physical energy doing our work, in exchange for money. Money then becomes a tool to buy what we need and want. Therefore, money is the middle man between our life energy and our possessions. Because money is a symbol of life energy, I treat it preciously.

You see, I don’t like to work for money. I would prefer my money working for me. That is the basic premise of being rich. The more we get our money to make money for us, the less we have to do the physical work, which then saves life energy and time, both of which increases our potential to make even MORE money.

What do I mean by making money work for you?

Well, let’s say you take your money and invest it in a brokerage account. You buy an investment at $100 and the company grows and does well. Your $100 is now $150. You just had your money work for you, earning you $50 without you having to work. Of course you will be taxed on your gains, reducing your earned income to let’s say $30. That isn’t much different than being taxed for the income you earn. In the end, that’s still $30 you didn’t have before, and you didn’t lift a finger to earn it.

Another example is real estate. Take our story. We scrapped together a down-payment to buy our primary home. We purchased a property whose monthly mortgage would cost the same as our monthly rent. Then we rented a portion of our home. The money we put into the home adds value to our assets in the form of equity earned, and the rental unit downstairs earns us an extra $623 a month. Prior to purchasing this home, we were paying someone else to keep a roof over our heads. By buying this property, we are making our money work for us, not us working for someone else’s benefit.

Even if you feel like investing in stocks or buying real estate is out of reach, you can still have your money work for you in more conservative ways. I wrote about investing in High Yield Savings Accounts for people who want access to their money in the near future or who are too uncomfortable with stocks and real estate.

Also, in my free course on Mastering a Budget, I wrote about the importance of assigning every dollar a job. Dollars are like responsibilities within a household or a workplace. If someone isn’t assigned a responsibility, the work doesn’t get done. Likewise, you need to make your money accountable for doing the work for you. If not, it’ll most likely float past your fingertips into another person’s hands as quickly as you earned it. Nothing gets done because money isn’t held accountable, and neither are you.

What does this have to do with Venmo?

Well, I personally never keep my money in my Venmo account. There is no benefit to it. It doesn’t make my transactions go through faster. It doesn’t make it more convenient for me to track the dollars I have. It doesn’t allow me to give every dollar a job. And it doesn’t grow my wealth.

I pull out every dollar from Venmo (at $0 charge using the Standard Trasfer to my bank account) the minute the notification goes through that I got paid. There are two pros to this.

This pulls every transaction amount separately and automatically logs each bank deposit from Venmo as its own transaction. This is important because we use YNAB (a platform for budgeting called You Need A Budget) to give all our dollars a job. Withdrawing every dollar when I receive a Venmo deposit simplifies the categorization step in YNAB (my affiliate link to get you started). The categorization step allows us to track how every dollar is made and every dollar is spent.
It also allows us to then take that money and increase our wealth, by putting it somewhere it can grow (like a HYSA or investment account) or paying for something to avoid debt.

Keeping money in Venmo is like keeping money locked away. It prevents financial wealth from growing as fast as it can. It also makes it more difficult to master a budget. I don’t know about you, but I cannot keep track of how much money is in my Venmo handle once two or three transactions go through. I simply forget! If you think of your dollars as little employees working for you, then you are essentially keeping your employees in a cage preventing them from accomplishing work!

One final note:

There is a circulating argument that it is more convenient to pay a friend when there is already money in a Venmo account. I just want to attest to the fact that it’s not any more difficult to make a payment through Venmo by pulling the money directly from a bank account. And if, by “convenient”, one means that they can justify spending money more easily when it’s already in an account meant for fun activities (dining out, birthday gifts, pizza, etc.), then that’s just them fooling themselves. But they would be right.

It’s easy to tell yourself, “I can dine out tonight and I’ll venmo my friend Bob for the meal. There’s still money in my Venmo account.”

That IS convenient! But you aren’t getting any richer.

Imagine the alternative. Your friend Sue pays you for last week’s dinner. You had offered to pay for the meal for your group of friends so that you can earn the credit card reward points in order to travel hack and fly internationally for free. You immediately transfer the money Sue gives you and place it in your HYSA (this is my affiliate link to set a HYSA up with Marcus. It gives my readers an additional 0.2% APY boost). When Bob asks if you want to grab dinner, you think about how you don’t have enough in your “Dining Out” envelope for dinner tonight. You ask if Bob would prefer to order pizza and save $10 a person or if he would be open to rescheduling to a future date when more people can join so that you can catch up with multiple friends at once and save on your “dining out” spending.

Sure, it isn’t glamorous. But it isn’t inconvenient either. It is simply … financially SMART.

After you’ve emptied your Venmo accounts, consider – Where else are you holding your money for the “just because”? And then go out there and pay yourself first. Make your money make money for you.

Your life energy will thank you.

Finance: High Yield Savings Accounts with Marcus

What is a High Yield Savings Account?

A high-yield savings account (HYSA) is something worth looking into. It is the same as a savings account that you would normally have at your financial institution (aka bank) but it yields higher rates (as the name suggests). A savings account at Chase bank will likely lead 0.01% interest per year, whereas a high-yield savings account can yield 1 or 2%. That’s 200x more than a traditional Chase account! This may not seem like a lot, but let’s take an example to demonstrate what a difference this can make.

Let’s say you have a financial goal of saving for a home. You currently have $20,000 in the bank, sitting idle waiting for a few more pennies to roll in before house searching.

If it was sitting in a Chase account, you would make $2 over the course of the year. But, let’s say you put it in a high yield savings account such as Marcus which is currently earning 1.3% per year (which is actually a low rate due to COVID . About a year ago they were returning over 2% APR). Then you would get an additional $260 by the end of the year for doing nothing other than choosing a different place to store liquid cash.

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About HYSAs

There are many options for HYSAs. Some offer you a sign-up bonus, and I know of a friend who treats HYSAs like credit card travel hacking. He signs up to get the sign-up bonus, then transfers the money to the next HYSA. This wasn’t on our checklist of requirements, however, below I detail what I would consider to be a good HYSA.

There is no fee associated with putting in or pulling out money from high-yield investment accounts. You can transfer directly from your bank or financial institution. There is no amount of time that you are required to leave it in the HYSA, although the funds may not be available for the first few days that you transfer it. Regardless, it starts earning interest on the day you transfer. And there is no minimum deposit. If possible, you want to choose an FDIC insured institution.

One should always remember, however, that the interest you gain is a taxable amount. Anyone who gains more than $10 in interest from a savings account will file Form 1099-INT which your bank will send you to include into your tax filings. So if you are gaining interest and pulling out your money, do make sure to set aside a little bit of that interest to cover the taxes. You are only taxed on the interest earned, not the contribution (aka the money you put in).

Shall I Always Put my Extra Money Into My HYSA?

The short answer is no.

Typically, you would want to invest in long-term investment accounts to get a higher rate of return. However, if you have short-term goals that you are saving up for, using a high-yield savings account is a great strategy. You don’t want to do active investments that are high-risk if you want to buy a home. It would be a shame to save up all that you need for a down-payment and then lose it all in an active investment. Plus, active investment isn’t our choice of investment strategy anyways. I wouldn’t recommend it, not because I have a low risk tolerance but because I honestly believe that no one can consistently beat the market. On the flip side, everyone can consistently make smart financial decisions that would earn them more money. More on this a different day.

Using Marcus HYSA In Our Student Loan Repayment Strategy During COVID-19

We just recently opened up our own high yield savings account with Marcus by Goldman Sachs. Prior to COVID-19, we did not have such an account because we were funneling all of our money towards my student loan, which had an interest rate of 6.5%. The more we paid it down, the less interest we would pay over time.

However, since COVID has reverted the interest rate of public student loans to 0%, we reduced our monthly contribution to my loans from $6.5k to $1k. We then funneled all the extra cash we had into a high-yield savings account to earn 1.3% interest. Before the student loan forbearance period ends on September 30, 2020, we will funnel all that money plus the interest earned into the debt.

It was a smart decision because when the COVID stay-at-home mandate started, everything was up in the air. We wanted to keep liquid cash in case of an emergency or a drastic change in income. We did not know if we would both be without jobs, or the extent to which the economy would be affected. Although we already had an emergency fund, the world-wide response to this pandemic was new to us and we did not want to take any chances. We approached it from a defensive stand-point. Surprisingly, it has worked well for us.

If you are paying down student loans, I would say there is still time (three and a half months!) to open a high yield savings account and earn a little interest passively. Then, without missing the deadline, make sure to funnel what you would normally (and then some) towards your student debt by September 30, 2020.

Also, some may ask, “Why do you still pay $1k?”. My minimum monthly payment is just under $1k normally, and although forbearance was granted to everyone without having an effect on your credit score, what most people don’t know is that forbearance still shows up on your record. It won’t mess up your record, technically speaking, but it can affect you financially. If you buy a home in the near future, for example, the mortgage lenders will see that you entered forbearance in 2020 and even though your credit score is 800, it may still affect their decision to lend to you. I didn’t want that on my record so I continued to pay it as if nothing happened. I simply stopped being aggressively paying my debt for the time-being.

Why Did We Choose Marcus by Goldman Sachs?

There are a couple things that we liked about Marcus.

They are an award-winning savings account that provides a rate that is 4x the National Average. They have no fees and minimum deposit. They allow same day transfers of $100k or less to and from other banks. They link other bank accounts for incoming and ongoing transfers which makes it very easy for me to simply log in and send money. You can open a personal account and/or joint account. And the savings are FDIC insured up to $250k (per person when considering joint accounts). This means that Mike and I can have up to a million dollars in their high yield savings account that is FDIC insured. How?

Mike opens a personal Marcus HYSA – $250k is FDIC insured.

I open a personal Marcus HYSA – $250k is FDIC insured.

We open a joint Marcus HYSA – $250k is insured for Mike, $250k is insured for me.

Lastly, we chose them simply because our roommate, Kirsten, used to work for a Goldman Sachs company. It is a reliable company and we trust our money with them. Simple as that. I know it’s a bias, so if you wish to shop the market, you can always shop the options here. I know of many people who have been happy at CIT Bank, if that helps. If you happen to choose to open a Marcus High Yield Savings Account using my referral link, you can receive an additional 0.20% Annual Percentage Yield (APY) on your Online Savings Accounts for 3 months.

Bottom line. I think it would behoove everyone to open a high yield savings account because many of us do save for short-term goals. We are all about earning passive income. I like to call it, free money. If you are looking to learn more, these resources are a great starting point.

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