We asked financial planners for their favorite high-yield savings account, and almost everyone said the same thing
Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, but our reporting and recommendations are always independent and objective.
- Business Insider asked financial planners for their favorite high-yield savings account. Most of them said Ally, an online bank.
- Ally's high-yield savings account has no minimum balance, no monthly fees, and currently offers a 2.2% annual percentage yield.
- A high-yield savings account is a good place to keep money you may need to access soon, like an emergency fund.
- Ally recently ranked second in J.D. Power's direct banking satisfaction survey and last year was named the best online bank by Kiplinger.
Two years ago, I opened a high-yield savings account at Ally and directed a fixed amount of every paycheck into it. I've found the high-yield savings account is a great place to send my automatic contributions, which financial planners say is one of the best and easiest ways to build long-term wealth.
I liked that Ally's online savings accounts have no ATM access and a limit on monthly transactions. Coupled with having my checking account at a different bank, those "limitations" not only kept me from dipping into my savings too often, but also helped me double my balance last year.
And when I recently asked a handful of certified financial planners (CFPs) for their favorite high-yield savings account, I wasn't too surprised that most of them had the same answer: Ally.
Looking for a better place to keep your money? Consider these offers from our partners:
Ally is an online-only bank that currently offers a 2.2% annual percentage yield (APY) on savings accounts. The average APY on traditional savings accounts is 0.1%. That means at Ally, a balance of $10,000 will earn $220 in 12 months, but you can start earning interest on as little as $1 since there's no minimum-balance requirement.
Any high-yield savings account earns significantly more interest than a checking or traditional savings account, helping you make the most of money you may need to access next month or next year. Dozens of banks offer high-yield savings accounts with varying interest rates for different balance amounts, which you can think of as a reward for saving.
"I recommend this type of account to keep your emergency funds in, or money that you have for a short-term goal. It's easily accessible and yielding a lot higher than your typical brick-and-mortar bank," said Luis Rosa, a CFP and founder of financial-planning firm Build a Better Financial Future.
Along with Rosa, Nick Vail, a CFP at Integrity Wealth Advisors, and Anjali Jariwala, a CFP and CPA at Fit Advisors, also recommend Ally.
Ally charges no monthly maintenance fees, so your savings and earnings are (mostly) yours to keep. As with any high-yield savings account, if you earned interest throughout the year, you'll get Form 1099-INT from your bank to include with your tax return and your interest will be subject to taxes at your normal income-tax rate.
Ally was named the best online bank and the best bank for millennials in 2018 by Kiplinger. Recently, it ranked second in J.D. Power's direct banking satisfaction study, one point behind Charles Schwab. Ally ranked "higher than average on competitiveness of interest rates," according to J.D. Power.
But high-yield savings accounts do come with a few limitations. Ally allows only six transactions per statement cycle, including withdrawals and transfers to different banks or other Ally accounts, on all online savings accounts and money-market accounts combined. Any transactions beyond the limit will incur a $10 fee.
Ally also offers investment accounts. Learn more »
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.