Wealthfront has one of the best high-yield savings rates right now, and it probably won’t last for long

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Investment app Wealthfront is currently leading the pack among high-yield savings accounts with one of the top APYs at 2.57%.
However, like any savings account, the interest rate is subject to change depending on the Federal Reserve’s federal funds rate.
It’s important to ensure any savings account otherwise fits your needs before choosing it simply for a high APY.
Wealthfront’s Cash Account is FDIC insured up to $1 million, fee-free, and requires a minimum opening deposit of just $1.
Currently, Business Insider readers who sign up for a Wealthfront investment account will receive their first $5,000 managed for free in that account in perpetuity.

High-yield savings accounts have become commonplace in banking, and for good reason. They allow you to steadily grow money you need in the short term, with zero risk of losing it.

The ideal high-yield savings account has no fees, a low minimum balance requirement, and a high annual percentage rate (APY), which is the rate you earn on your money on an annual basis.

When it comes to earning potential, investment app Wealthfront’s Cash Account beats the high-yield savings accounts of its brick-and-mortar and online competitors with a 2.57% APY, as of this writing. Wealthfront debuted itsCash Account earlier in 2019 with a 2.24% APY and has been steadily increasing it ever since. What’s more, the account is fee-free, requires a minimum opening deposit of just $1, allows unlimited transfers, and is FDIC-insured up to $1 million.

Here’s how Wealthfront’s Cash Account stacks up against two popular high-yield savings accounts: Ally’s online savings account and Goldman Sachs’ Marcus account:

Shayanne Gal/Business Insider

There’s no denying Wealthfront’s Cash Account is an all-around great deal, but it’s unlikely the interest rate will remain as high as it is today. In fact, the APY offered when you open any general savings or checking account isn’t locked in. When the rate is as good as it is on Wealthfront’s Cash Account, you can count on it changing, probably sooner rather than later.

When you open a high-yield savings account at Wealthfront, your money is stored at one of its partner banks. These banks have interest rates that are determined by the federal funds rate, which moves up and down at the behest of the Federal Reserve. Wealthfront passes along the interest rate set by its partner banks to its own clients, so when the federal funds rate fluctuates, so too does the rate on your high-yield account.

As Wealthfront CEO Andy Rachleff explained in a blog post, "the fed funds rate influences nearly every financial institution, and a rate decrease directly impacts consumers. The good news: when the rate goes down, mortgage rates go down. The bad news: high yield savings account rates and Certificate of Deposit (CD) rates go down, too. Unfortunately that includes Wealthfront cash accounts as well."

Across the board, high-yield savings accounts offer better rates than a traditional savings account — hence: high-yield — so you’ve already made progress toward automatically building wealth by keeping your money there, regardless of how the rate shifts over time.

Wealthfront recommends its high-yield savings account for storing money that’s going to be used within five years, whether an emergency fund, down payment for a home, or an upcoming expense. The sooner you open and begin contributing to a Wealthfront Cash Account, the more time you have to take advantage of its above-average rate and maximize your savings.

If you already have a high-yield savings account elsewhere, only you can decide whether it’s worth it to move your money for a higher rate. It’s always best practice to make sure the account otherwise meets your needs before chasing an interest rate that is bound to fluctuate.

Currently, Business Insider readers who sign up for a Wealthfront investment account will receive their first $5,000 managed for free in that account in perpetuity.

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