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Wealthfront Cash Account is a high-yield savings product with checking capabilities.The account is FDIC insured up to $1 million, fee-free, and needs a minimum opening deposit of $1.High-yield savings accounts may be a good choice for your short-term savings and emergency fund.
It took me longer in adulthood than I’d like to admit to finally build a habit of saving money, but once I did, it stuck. While I’d love to tell you that I tracked every last penny I spent, the truth of how I boosted my savings is much simpler: automatic deposits and high interest rates.
I opened a savings account with an online bank that offers high interest rates and no fees, and I set up automatic deposits into that account from my paycheck. This means the money I intend to save never even makes it to my checking account, making it impossible for me to spend it impulsively.
Thanks to the popularity of online banks like Marcus and Ally and high-yield savings accounts, new options are cropping up everywhere, and competition is driving rates up and pushing fees down. Wealthfront, one of the most popular robo-advisers — online applications that automate investing to make it easy and more accessible — is the latest company to jump on the high-yield-savings bandwagon.
While it’s not called a high-yield savings account, Wealthfront Cash Account has many of the same features as a savings account — and it might be leading the pack in helping you make the most of your money.
How does Wealthfront’s Cash Account work?
The name Cash Account might be confusing to some, but this is essentially a high-yield savings account. That means you can transfer money into and out of the account for free whenever you want, and you’ll get some of the highest rates available for savings accounts, which can make a difference when you’re trying to build up your savings.
You won’t have to pay any fees with this account either, regardless of your balance, and you need to deposit only $1 to get started.
Wealthfront describes its vision for the account as being “self-driving money,” which is just a fun way of saying it will help you automate your finances.
Lots of companies doing this are relatively new but wildly successful in the financial technology, or fintech, industry. New online banks offer fee-free checking and savings accounts that can be set up in minutes and even be configured to split direct deposits from your employer among various accounts. Mobile banking makes it easy to automate bill payments and paying off debt. And robo-advisers like Wealthfront even automate your investments for you.
This self-driving-money revolution is essentially taking what wealthy folks have always had in the form of spendy financial planners — the ability to “set it and forget it” with their money and still experience good returns — and making that available to the masses.
Wealthfront says the Wealthfront Cash Account is now open to current Wealthfront investing members as well as new Wealthfront clients.
The best features of Wealthfront Cash Account
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No fees$1 minimum opening depositFDIC-insured up to $1 millionAll customers can access checking features, including a debit card and direct deposits
This account is fee-free, which is a must, as monthly service fees — even when you can waive them by maintaining a minimum daily balance — can end up eating into your savings and canceling out any interest you earn. It’s suitable for both seasoned savers and folks who are just getting started since you have to maintain a minimum balance of only $1 to open an account and earn interest.
Wealthfront
Finally, holders of the Wealthfront Cash Account are insured by the FDIC for up to $1 million, which is significantly higher than the $250,000 limit available at traditional banks. Wealthfront’s achieves this by spreading cash deposits across four different banks. If you already have a savings account at one of those banks, you won’t qualify for more than $250,000 in total FDIC insurance from that particular bank.
Biggest flaws
Online onlyTo deposit cash, you’ll have to visit a Green Dot location and pay a fee
Wealthfront isn’t your traditional brick-and-mortar bank, but an online-only investment service that is expanding into new services with the Cash Account. You don’t have to worry about your money — online banks have been around for a while now, and as long as they’re FDIC-insured, they’re safe. But people who prefer to do their banking in person or aren’t as comfortable with online banking might prefer to bank elsewhere.
Wealthfront recently made it possible to set up direct deposits into your Cash Account, but you still can’t deposit paper checks with your mobile app. However, this feature is in the works.
The best way to use Wealthfront’s Cash Account
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Use Wealthfront’s Cash Account for:
Your emergency savings fundShort-term savings goalsA high-yield checking account
Don’t use Wealthfront’s Cash Account for:
Your retirement fundLong-term savings goals
Like other high-yield savings accounts, Wealthfront Cash Account offers the best returns you can get on money you can access easily. It’s also a low-risk place to park your cash.
This makes it a great option for your short-term savings goals and emergency fund. I like to use savings accounts for money I might need to access in the next five years.
Because the account now has checking features, you can use it as a hybrid savings/checking account, and your spending money earns the same interest as your savings.
For longer-term savings goals, I prefer options with higher returns. Certificates of deposit lock up your money for a specified period (usually one to five years) but have higher interest rates. As for your retirement savings, even the best high-yield savings accounts won’t come close to competing with the average returns from a long-term investment strategy or a tax-advantaged retirement account like an IRA or a 401(k).
The bottom line
Wealthfront is shaping up to be one of the best options for your savings with its Wealthfront Cash Account. It offers one of the highest interest rates, with no fees and with a minimum-balance requirement that anyone can maintain.
Given that switching my bank accounts helped me drastically improve my savings habits, I’d definitely recommend high-yield savings accounts, whether with Wealthfront or another low-fee online bank. By the end of this year, I’ll have earned enough interest to cover a flight to Europe, which makes cutting back on shopping to boost my savings a lot more rewarding.