Wealthfront's 2.57% APY will not stay high, but the count remains good

High yield savings accounts have become commonplace in the banking sector for good reason. They allow you to regularly generate the money you need in the short term, without any risk of losing it.

The ideal high yield savings account has no fees, only requires a minimum balance and an average annual effective rate (APY), which is the rate you earn your money each year.

As for the earning potential, the Wealthfront investment application's cash account beats the high-yield savings accounts of its legendary competitors and in line with an APY of 2.57 % at the time of writing this article. Earlier in 2019, Wealthfront opened its Cash account with an APY at 2.24% and has been increasing it steadily ever since. In addition, the account is free, requires a minimum initial deposit of $ 1, allows unlimited transfers and is insured up to $ 1 million by the FDIC.

Here's how the Wealthfront Cash Account compares to two popular high-yield savings accounts: Ally's online savings account and Goldman Sachs' Marcus account:

The Wealthfront cash account is undeniable, but it is unlikely that the interest rate will remain as high as today. In fact, the YPA offered when you open a general savings account or a current account is not blocked. When the rate is as good as the Wealthfront cash account, you can count on its evolution, probably as soon as possible.

When you open a high-yield savings account at Wealthfront, your money is stored in one of its partner banks. These banks have interest rates determined by the federal funds rate, which fluctuates upward, at the request of the Federal Reserve. Wealthfront communicates the interest rate defined by its partner banks to its own customers. So when the federal funds rate fluctuates, so does the rate in your high yield account.

As Andy Rachleff, CEO of Wealthfront, says in a blog post, "federal funds rates affect almost all financial institutions and a drop in rates directly affects consumers." The good news: when the rate goes down, Mortgage rates are falling, and the bad news is that yields on Yield Savings Accounts and Cdn rates are also falling, but unfortunately this also includes Wealthfront cash accounts. "

Overall, high yield savings accounts offer better rates than traditional savings accounts, hence high returns. So you have already made progress in the automatic constitution of wealth by keeping your money there, regardless of the evolution of the rate over time.

Wealthfront recommends using its high-yield savings account to store the money that will be used within five years, that it's a fund of funds. 39, emergency, a down payment for a house or an upcoming expense. The sooner you open and start contributing to a Wealthfront Cash account, the more time you have to take advantage of its above average rate and maximize your savings.

If you already have a high-yield savings account elsewhere, only you can decide whether it's worth transferring your money to a higher rate. It is always advisable to make sure the account meets your needs before pursuing a fluctuating interest rate.

Currently, Business Insider readers who open an investment account in Wealthfront will receive their first $ 5,000 managed free of charge in this account in perpetuity.