You Can Now Open A Savings Account With 4% APY: Are Stocks Still Worth It?

By Grit Daily Staff Grit Daily Staff has been verified by Muck Rack's editorial team
Published on June 6, 2022

Traditionally, the biggest draw of a savings account has been risk-free saving. You put your spare cash there every month, earn a small amount of interest, and rest assured that it will be there when you need it. However, that may be about to change, with a new initiative by a Fintech company called Current, which is offering a savings account with 4% APY.

The savings account offered by Current is making waves by offering a 4% annual percentage yield (APY) on savings up to $6,000. This is in comparison to the 0.13% offered with most traditional types of savings accounts. You earn money with no risk in what is called a savings pod.

How does this work?

Current is a unique company, in that it essentially offers a banking and payments service that differs from both traditional banks and modern money transfer startups. You can get different kinds of accounts on apps like PayPal and Payoneer, but they offer nothing of the sort that Current does.

Their most exciting product is their bank account that comes with savings pods. These accounts are free to open to consumers and require no credit check. They simply use your social security number to confirm your identity.

You get 3 savings pods, each with a maximum amount of $2,000 and a fixed APY of 4%. This provides a great way to start growing your money before you are ready to risk big bucks.

In theory, a 4% APY would be enough to rival the success of many stock traders. Does this mean that stocks are no longer worth it? Well, not quite.

Does This Render Stocks Redundant?

A 4% APY is pretty hefty, and many people trying to trade stocks don’t manage to consistently make these kinds of returns. But that does not mean you should give up your stocks portfolio.

The main limitation of Current is the maximum savings. At present, you can save up to

$6,000 across your savings pods at a yield of 4%. While $6,000 may seem like a big sum when you are starting out your savings journey, it will not take too long for most clients to hit the limit.

Nonetheless, the 4% APY ensures that your $6,000 works for you on a much greater scale than other high-yield accounts. For example, a high-yield account like Marcus by Goldman-Sachs offers a 0.6% APY. Only if you save $40,000 in this account will you match what you will earn from your $6,000 in your Current savings pods!

In other words, while you should definitely take advantage of a 4% APY, it should not be all that is in your portfolio. How exactly should this work?

Taking advantage of a 4% APY

The reality is that a 4% APY on $6,000 is significant but will not make you wealthy. Nonetheless, it is certainly an offer you can take full advantage of. By keeping $6,000 in your savings pods, you can make good returns every year without doing any work.

Hopefully, this is not all the savings you have. The savings that exceed your $6,000 limit can make a lot of money in a stock trading portfolio which you actively maintain on a day-to-dat basis. This way, you are making the same money you would on a much larger savings account, while using the extra you have to find ways to grow your wealth.

You can also use the returns from your 4% APY savings to buy stocks. Even if you only start with $6,000, the interest will allow you to start trading in order to further your pursuit of real wealth.

In theory, 4% APY on your savings could prove a significant investment. However, you won’t get this kind of deal on huge sums of money. Stock trading is still an important way of building your wealth.

By Grit Daily Staff Grit Daily Staff has been verified by Muck Rack's editorial team

Journalist verified by Muck Rack verified

Grit Daily News is the premier startup news hub. It is the top news source on Millennial and Gen Z startups — from fashion, tech, influencers, entrepreneurship, and funding. Based in New York, our team is global and brings with it over 400 years of combined reporting experience.

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