How to Save for Large Purchases with a HYSA
Making large purchases can be daunting! Especially for things like a car or house purchase where a large down payment is expected. I don’t come from a background where my parents can just gift me $10,000 for a home purchase. I have to figure out where I’m going to get the money ON MY OWN. If you’re in a similar situation, it can be overwhelming, but don’t worry! I got the inside scoop on how you’re going to save for that large purchase. Luckily for us, a HYSA (high-yield savings account) is a great way to save for large purchases.
Whether it’s for a wedding, car, or home purchase, you’re going to hit that savings goal! I know you are! Now, I know that most people like to start with a budget, which is a great place to start but I actually want to talk to you about high-yield savings accounts (or HYSA for short) and why they are a key component to making your large purchase. Hear me out.
3 Reasons Why a HYSA is The Way To Go
Here are the top three reasons you should open a HYSA (high-yield savings account) for saving for your large purchase:
- Avoid costly maintenance fees
- The APY of your Savings Account Matters
- As you level up in life, so should your bank
Pro Tip: If you’re thinking, “what the heck is an APY” click here. In brevity, high APY is good and low APY is bad for savings accounts. In other words, high APY’s make you more money!
1. Avoid Costly Fees
You should NEVER have to pay bank fees for keeping your money in their accounts. Let me say it louder for the people in the back: NEVER let banks charge you unnecessary monthly fees. Some banks charge up to $10 a month on “monthly maintenance fees”. That doesn’t seem like a lot right, but if you are saving to buy a home and you save for 5 years: that’s $10 x 12 x 5 = $600 you spent paying for unnecessary fees. Never accept less than what you’re worth, and that goes for your bank account APY.
2. The APY of your Savings Account Matters
I hate to break it to you, but I’m going to make you look at your bank account details, specifically your bank account APY. Don’t worry, I will make the math stuff easy for you, I promise!
For example, let’s say your goal is to save $50,000 for a down payment on a house and you happen to bank with Bank of America. We’ll assume you save $10,000 a year for your house fund. Let’s look at Bank of America’s APY on the savings account shall we; it’s 0.01% (yikes!). Meanwhile, let’s say that your friend, Kristina, decided to save $50,000 as well but they have a HYSA that offers an APY of 2.7%. Let’s compare what you and Kristina save over the course of 5 years.
Congratulations you made $15 on interest in 5 years, but this doesn’t include any fees your account acquired. On the other hand, your home girl Kristina made $4,198.78 in interest over 5 years! She saved the same amount of money as you did, expect her HYSA worked harder for her, which grew faster! That’s literally enough to cover some of the closing cost of a home, or money you could spend on furnishing your new home. Heck that’s money you could have used for a dope vacation! I can’t stress this enough, the APY of your savings account makes a HUGE difference! I want you to reach your savings goal as soon as possible!
Since, I want the best for you, I put together a list of common banks, their APY’s and compared them to online banks with HYSA. In other words, if you see your bank on here and it’s offering you a low $1 interest earned, it’s time to move on.
For the most accurate rates, always check the bank’s website since they do tend to fluctuate with the economy. To learn more about APY, click here.
3. As you level up in life, so should your bank account
Now, I know that switching or opening a new savings account seems like a lot of work but it’s totally worth it. You deserve your dream wedding, your dream house or a car that won’t break down on you. All these large purchases require a down payment and saving for it shouldn’t be stressful.
As we get older, we experience personal growth and challenge old habits or ways of thinking. I am asking you to do the same for your bank account, because you deserve more. With so many online banks out there, you’re going to find the perfect HYSA for you. If you’re hesitant about closing your old account, don’t. But do open a HYSA where you can save for your wedding, home or car purchase.
You don’t have to completely switch banks if you like the idea of going into a physical bank for help. I had a hybrid of both when I opened my first HYSA. I used my Bank of America account to deal with bills and moved my savings into my HYSA. After about a year of seeing the fees from Bank of America and the poor interest I was getting from their account, I made the switch completely to my online bank and have NEVER looked back.
I’m Proud of You!
If you’ve gotten this far into my blog post, I’m proud of you! Talking about money can be daunting and overwhelming, but you just took the first step to overcome that fear. For more information on what to look for in a HYSA, check out this blog post. You’re going to kick ass at saving for your dope wedding, house or car, or whatever it is you’re saving for. I hope this blog post gave you a sense of empowerment! Feel free to comment if you have any questions or concerns!
And for fun, digestible personal finance content follow my Instagram account! Because saving money should be fun!
