Multiply your Savings and Your Community Impact
Get the highest yield on your savings —
And support small business lending and community reinvestment.
Interest rates are up, inflation is up, and everyone is talking about a possible recession. What’s the best way to protect your financial wellbeing and your values in this turbulent time? Read on to find out.
With the looming possibility of a recession, having adequate savings is essential. In case you or someone in your household loses a job, you need to be prepared with enough savings. Unemployment benefits are usually only a fraction of your earnings, so you’ll want to have cash available, if needed. Second, with interest rates so high, you want to avoid debt. If you have an expensive repair bill or need healthcare that’s beyond your insurance coverage, you can use some of your savings to cover that and avoid high-interest debt.
Most experts recommend having 3-6 months of living expenses saved in a contingency (emergency) fund. If you don’t already have that, act quickly to pay off high-interest debt and build your savings. If you’re shy of 6 months of savings, or just want more cushion, definitely figure out how you can contribute more to your savings. There’s little downside to having savings totaling more than 6 months worth of living expenses when facing a possible recession. (We’ll talk about the downsides of longterm having too much cash on hand in another post.)
As you’re building up those 6 months of contingency reserves, you should seek to get more than the typical checking account yield (interest earned) of 0.01-0.25%. Since you don’t need the money in your savings account to pay bills every month, consider putting it in a high yield savings account (HYSA).
HYSA are a great option now with interest rates so high and the tumultuousness of the stock and bond markets. Below is a chart showing the highest yields on savings accounts as of January 2023, and whether those banks fund climate change, support small business, or invest in their local communities.
Our ratings for “values-alignment” banks* evaluate the following:
small business lending,
housing lending,
small farm lending,
financing communities, and
funding fossil fuels (where data is available).
*Ratings provided thanks to MightyDeposits and Bank.green.
The following list excludes some banks that are purpose-built to address the climate crisis because of the many requirements to get a savings yield over 3%. If you’d rather sacrifice yield for greater environmental efforts, check out our guide to the best eco-friendly banks.
There are a few things you should be aware of when choosing the best high yield savings account for you.
These yields are all subject to change, especially as the federal funds rate changes.
The income you earn from the yield (interest) is considered taxable income.
Due to the nature of high yield savings accounts, most of these have a limit of 6 withdrawals per month. If you need more than that (which you hopefully you won’t for a contingency fund), make sure you choose an option that will allow as many as you need.
All of these are FDIC insured.
As always, do your own research before making the leap as there may be other factors that are important to you in choosing a HYSA.
While it can seem intimidating to change banks, especially if you’ve been with the same bank for years, it can pay off multifold — you may earn income on your deposits as with these HYSAs and you may find much greater peace of mind knowing your savings aren’t being used to fund fossil fuel extraction. Moving some or all of your savings over to a new savings account is usually a fast, seamless process done via bank ACH transfer. And, unlike with a new checking account, you likely won’t need to change your bill pay setup when you start a new savings account.
You work hard for your money, shouldn’t your money work hard for you?
DISCLOSURE: THIS POST MAY CONTAIN AFFILIATE LINKS, MEANING I GET A COMMISSION IF YOU DECIDE TO ENROLL VIA MY LINKS. HOWEVER, THAT HAS IN NO WAY INFLUENCED MY RECOMMENDATIONS.
