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There are few things in this world that affect our daily lives more than money. Every day we make decisions about earning, saving, spending, and giving. And many of us have learned this past year just how important those decisions can be. When times are good, it's imperative that you save as much money as you can for when times are lean.

To stay financially healthy in good times and bad, there are savings tools you can use to get the most out of your money. Stashing cash in a mattress for a rainy day isn't the best savings strategy like it was for our grandparents.

Of course, millions of us use regular checking and savings accounts. But that's just the beginning when it comes to bank accounts and saving your money. Many aren't aware that they can get a higher rate of return on their short-term savings using alternatives like high-yield savings accounts, like the American Express® High Yield Savings Account (member FDIC) as well as with a Certificate of Deposit (CD).

Short-Term Savings vs. Long-Term Savings and Investments

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When you are putting together your monthly budget and making a plan for your money, there are two different types of savings to consider. Short-term savings accounts are what you would use to build an emergency fund and save up for major purchases.

The most commonly used short-term savings accounts are high-yield savings accounts, like the American Express High Yield Savings Account and CDs. These products allow you to keep your money fairly liquid and available during the short term so you can access it when needed.

Unlike a traditional checking or savings account that usually delivers an Annual Percentage Yield (APY) as low as .01 percent, a high-yield savings account can offer as much as two percent APY. With a CD, you can find rates as high as three percent.

Because interest in these types of accounts compounds quarterly, monthly, or daily, the added interest becomes part of your average daily balance. And that amount also earns interest in the next cycle.

On the other hand, long-term savings and investment accounts are for retirement. Those types of accounts—like 401k's and IRA's—are for deposits that you don't plan on accessing for at least 10 years. They can have significantly higher rates of return, but they usually have more risk and are incredibly difficult and/or expensive to access in the short-term.

The Difference Between High-Yield Savings Accounts and CDs

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Both the American Express High Yield Savings Account and CDs have a good degree of liquidity so you can gain access to your short-term savings when needed. But there are some differences between the two.

High-yield savings accounts, such as the American Express High Yield Savings Account, offer variable interest rates that are usually higher than a regular checking or passbook savings account. However, those higher interest rates do come with some withdrawal limitations. A high-yield savings account usually limits the number of withdrawals you can make during each monthly statement cycle. The American Express High Yield Savings Account has a limit of nine withdrawals per month and one transfer.

These accounts are ideal for an emergency fund. Experts recommend keeping three to six months of expenses in an emergency fund so you can avoid high-interest credit cards and loans when an unexpected expense arises. Ideally, that money should be saved in an account that you can easily access when you absolutely have to.

Meanwhile, CDs offer fixed interest rates that are also higher than regular savings accounts. Sometimes, the rates are even higher than a high-yield account. But again, there are some trade-offs to earn that higher rate.

With a CD, you can only access your money when it reaches maturity. As a rule, CDs mature in terms ranging from six months to five years. There are also many stops in between. A CD is a good option when you are saving for a big purchase, like a new vehicle, a vacation, or a down payment on a home.

American Express National Bank offers an easy online tool that will show you your money's future value based on the length of the CD you purchase, the interest rate, and the amount deposited.

Debunking Savings Account Myths

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Myth #1: "Banks are risky, I'm better off stashing my cash in a safe at home."

While the world of banking and finance is hard to navigate, there is one thing that consumers can be confident about—banks are one of the safest places to keep your money. An FDIC-insured bank will insure your deposits across all of your accounts up to $250,000.

Using a traditional savings account, a high-yield account, or a CD actually protects your money better than leaving it at home. It's also safer than putting it in the stock market because there's essentially zero risk.

Myth #2: "I don't earn enough to save money."

Most of us don't have hundreds of dollars left over every month. In fact, the majority of Americans are struggling to make ends meet. According to CNBC, 63 percent of Americans say they've been living paycheck-to-paycheck since the pandemic hit.

However, with features like direct deposit, you can easily save small amounts each paycheck without missing it. Setting up a withdrawal of as little as $10 per paycheck into a savings account can start to add up quickly. Those dollars will work for you and earn interest.

If you get paid weekly, having $10 automatically deposited into a savings account each paycheck would leave you with $520 in savings at the end of the year. Automatically depositing $20 into a savings account with each weekly paycheck would leave you with more than $1,000 in savings.

Don't be skeptical about starting small because time and Annual Percentage Yield (APY) are your best friends when it comes to saving money.

Myth #3: "I'll never grow my money if I leave it in a bank account."

If you think it's pointless to keep your money in the bank, you have to remember the principle of compound interest. This means that you are not only earning interest on the money you've deposited, you're also earning interest on the previous interest you earned.

Your money can grow over time without adding anything to your original investment. Or, you can make regular deposits to keep earning more interest so your money grows faster.

Our Takeaway

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Taking the time to create a strategy for your income—no matter how big or small—leads to incredible results. Instead of keeping all of your cash in traditional checking and savings accounts, setting up regular deposits into an American Express High Yield Savings Account can help you reach your money goals faster.

These accounts offer rates that are double or triple the rate of a personal checking or savings account. When you take the time to make a personal financial plan, you'll miraculously find money you never knew you had!

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