Published in: Banks | April 16, 2020

Should You Invest Your Stimulus Check in a High-Yield Savings Account?

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Putting your money into a high-yield savings account could be the right choice for three reasons. 

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Thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, most Americans will soon get a large lump-sum payment from the government. The size of your stimulus check depends on your income and marital status, but it could be as much as $1,200 per adult and $500 for each dependent child under 17.

If you're one of the many people receiving this money, you'll have to decide what to do with it. And one of the best options could be to invest it in a high-yield savings account.

Why a high-yield savings account could be the best option for investing your stimulus check

Putting your stimulus funds into a high-yield savings account makes sense for three primary reasons:

  1. Investing it in a high-yield savings account allows you to earn a decent return while limiting your risk. High-yield savings accounts generally provide a much better return on investment than just leaving the money in your regular checking or low-interest savings account. If you can earn around 2.0% APY in a high-yield account, your $1,200 stimulus check could net you about $24 in interest by year's end. While, theoretically, you could earn a larger return from the stock market, savings accounts are far less risky. That's because savings accounts are insured by the FDIC and you can't really lose the money.
  2. The money is easily accessible in case you need it. Although savings accounts generally limit you to six withdrawals a month, you can still access your money very quickly if you need it during the coronavirus crisis. You won't be tying up the cash, as you would by purchasing less liquid investments such as bonds or CDs. And you won't have to worry about having to sell stocks at a loss if you need the money quickly and the market has gone down.
  3. You can keep the money separate from the funds in your checking account. If you just leave the money in your standard checking account, chances are good you'll end up spending it without even really thinking about where it should go. If you have it in a separate savings account, you can avoid tapping that account unless you need to, so the payment can serve as a mini-emergency fund (or you can bulk up your existing emergency fund).

When a high-yield savings account isn't the right choice for your stimulus check

As you can see, there are a few really good reasons to invest your stimulus funds in a high-yield savings account. But that doesn't mean this is the right choice for everyone. In fact, there are a few situations in which doing something else with your money would likely be smarter. You should think about using the money a different way if either of the following are true:

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  • You need the money to pay your bills: If you have bills that are due right now and no other way to pay them, you may want to use your stimulus money to do that. While most creditors and landlords are working with customers to avoid late fees or eviction, interest still accrues on debt, and rent is still due. If you don't pay now, you'll just have to pay more later.
  • You already have a hefty savings fund: If you have a lot of emergency savings that you can access easily, you may not need to bulk up your liquid savings account balance. In this case, if you're confident you won't need the money for at least five years, it may make more sense to invest in the stock market and buy some stocks during the coronavirus downturn.

Use your stimulus fund in the right way for you

Putting your stimulus check into a high-yield savings account provides a good balance between risk and reward, because you can earn a reasonable return on your money without putting it at risk or tying it up so you can't get it easily if you need it. You can check out our guide to the best high-yield savings accounts to find a bank that's offering a good ROI and open an account today so you'll be ready to move your money into savings as soon as the IRS deposits your check. 

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