Robo-advisor Wealthfront offers a high-yield account that can help you earn more 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.
Note that after this article was published, Wealthfront decreased the APY on its Cash Account following multiple rounds of interest rate cuts by the Federal Reserve. While the numbers below are no longer applicable, the concept is: Your money will grow faster in a high-yield account.
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 near 2% in interest, you can 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.
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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. After subsequent rate cuts, Wealthfront continued to decrease the APY.
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.
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Also note that the calculation assumes a constant APY of 2.32%, though it's unlikely any APY 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.
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The account offers a 5.00% APY, which is over ten times greater than the national average interest rate of 0.46% earned on savings accounts, according to the Federal Deposit Insurance Corporation (FDIC) as of April 15, 2024. Still, some of the best high-yield savings accounts edge out Wealthfront.
We typically credit your account with the interest you earned during the previous month by the first day of the following month. For example, all of the interest that accrued in November should be credited to your account by the end of the first business day in December.
The cash balance in the Cash Account is swept to one or more banks (the “program banks”) where it earns a variable rate of interest and is eligible for FDIC insurance.
Let's look at how much you could make by depositing $1,000 into accounts with various ranges: After one year with a regular account at 0.43%: $1,004.30. After one year with a high-yield account at 4.50%: $1,045.00. After one year with a high-yield account at 5.00%: $1,050.00.
By keeping your extra savings in a high-yield savings account, you may be able to earn more interest. If you keep $20,000 in a high-yield savings account for one year at 4.50% APY, you can make $900 from interest. The longer you allow your savings to sit in your account, the more interest you'll earn.
Wealthfront isn't a bank, so it partners with several FDIC-insured banks in order to offer the Wealthfront Cash Account. While FDIC insurance generally caps out at $250,000 per person, Wealthfront keeps your money in many different banks at once, letting you be insured for up to $8 million per person.
Many consider the Wealthfront user experience a simple and straightforward one. Wealthfront offers a taxable investment account, plus many types of accounts specifically geared toward retirement. All offer passive investing that can help you reach your financial goals with minimal effort.
As you likely know, Wealthfront partners with multiple banks to offer you the Cash Account—and the Cash Account APY is highly dependent on the rate those banks pay us for deposits.
Wealthfront carries the same safety protocols that you'll find in most major financial institutions. Your cash is insured by the FDIC, while investments are insured by the SIPC.
Wealthfront uses more than one program bank to ensure FDIC coverage of up to $8 million for your cash deposits. FDIC insurance coverage is limited to $250,000 per qualified customer account per banking institution. For more information on FDIC insurance coverage, please visit www.FDIC.gov.
The main con of Wealthfront is that its required $500 minimum deposit is higher than other free robo-advisors like SoFi Invest and Betterment Investing.
If you earned more than $10 in interest or $600 in awards in a Wealthfront Cash Account, we'll send you a 1099. Use this form to file your 2023 tax return. If you have a taxable investment account with dividends or realized capital gains, we'll send you a Consolidated 1099. Use this form to file your 2023 tax return.
Today, we're excited to announce you can make free same-day withdrawals from your Wealthfront Cash Account every day, including holidays and weekends. That means you can earn a high APY on all of your cash without leaving a buffer in external accounts for last-minute purchases.
Summary. Retiring with $200,000 in savings will roughly equate to $10,000 annual income. If you choose to retire early, you will need additional savings in order to have a comfortable retirement.
For example, if you take out a five-year loan for $20,000 and the interest rate on the loan is 5 percent, the simple interest formula would be $20,000 x .05 x 5 = $5,000 in interest.
Interest can compound annually, quarterly, monthly, or even daily—the more often interest compounds, the faster your balance grows. For example, say you deposited $10,000 in a high-yield savings account with a 3% APY that compounds annually. At the end of a year, you'd have $10,300.00 in your account.
Introduction: My name is Corie Satterfield, I am a fancy, perfect, spotless, quaint, fantastic, funny, lucky person who loves writing and wants to share my knowledge and understanding with you.
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