Federal reserve

If politicians aren’t able to reach a deal, then the U.S. federal government could shut down on October 1. That might temporarily dent economic growth through reduced consumer confidence, as well as disrupt defense and healthcare spending.

However, government shutdowns historically have been brief, often lasting days, and most employees receive back pay. Hence, while the disruption is considerable, it’s insufficient to prompt a recession, if history is any guide. Also, the vast majority of government employees are employed by the state and localities, which are generally insulated from a shutdowns at the federal level.

Still the uncertainty could weigh on the economy, but that may be against a backdrop of relatively strong third-quarter growth, according to the latest perspective of forecasters and nowcasts . Recent quarterly estimates have Q3 growth topping 3%, which is relatively high. It’s unlikely a government shutdown in isolation, unless extremely drawn out, could prompt a recession from such high levels of growth.

Missing Economic Data

Ironically, a shutdown may also prompt delays or gaps in provision of key economic data releases from the government used to measure and forecast growth and unemployment. During a shutdown, economic forecasting would become more challenging. That’s especially true at a time when the Federal Reserve has stressed the data dependence of its next decision in interest rates .

The October 1 Deadline

October 1 is the start of the government’s fiscal year. If no political deal is reached by then, then the federal government would shut down. Of course, politicians continue to discuss plans to pass a budget and avert this scenario, but time is running out and the risk of a shutdown is real. Also, the current political gridlock where Republicans and Democrats split control of Congress has historically made government shutdowns more likely, even without internal divisions within Republican ranks.

That means a shutdown could occur at the start of the fourth quarter for the U.S. economy. When considering other economic risks such as the resumption of student loan repayments, rising energy costs and the ongoing UAW strike, it’s possible growth could weaken due to a host of one-off factors in combination, though a government shutdown would only be a contributing factor in such a scenario.

Impact On Employees And Contractors

Many Americans are employed by the U.S. federal government and many more hold positions that are funded, directly or indirectly, by government spending. Fortunately, those directly employed by the U.S. federal government would receive back pay when the shutdown ends.

However, even a delayed paycheck can be extremely disruptive for household budgets. That disruption could easily create a drag on consumer spending. The situation for government contractors is potentially worse, with no guarantee of back pay after the shutdown ends. So, contractors, dependent on their specific situations, could see a permanent loss of earnings for the duration of any shutdown.

Sector Impacts

Work in defense and healthcare is often tied closely to government funding. Therefore, any shutdown could have a material impact on these sectors to the extent that jobs and associated payments are disrupted or delayed.

The Length Of Any Shutdown

The length of a shutdown is impossible to predict, though in recent years, they have tended to last slightly longer. That’s in part because various steps have been taken over time to preserve the critical functions of government during a shutdown. That makes them somewhat more manageable for those outside the government, even if delays occur at airport screenings or the National Parks are disrupted. In historical terms a shutdown of a few days is most common and any shutdown lasting more than two weeks is rare.

Ultimately, a government shutdown would be a drag on the economy. But given its temporary nature, a shutdown would need other additional factors to produce a recession, especially against a backdrop of Q3 growth that appears robust on most recent estimates.

Everyone recognizes the importance of saving money in a world of increasing living costs and unpredictable economic shifts. Nevertheless, the crucial question is not just about saving but about where you save. Considering the plethora of savings accounts available today, the task of selecting the most beneficial one could feel daunting. In this article, we’ll guide you through the process, highlighting some key steps to follow and variables to consider in the pursuit of the best high-yield savings accounts .

The Allure of High-Yield Savings Accounts

Before delving into how to locate these accounts, it’d be helpful to understand why they’re so sought after. High-yield savings accounts (HYSA) provide a higher interest rate compared to regular savings accounts. The notable difference in these interest rates is due to the operations of different financial institutions. Banks that operate online typically have less overhead costs, allowing them to offer higher interest rates. Higher interest rates equate to more earned income from your savings, making HYSA a lucrative opportunity for many savers.

Despite the fluctuating nature of interest rates, which generally move in tandem with Federal Reserve rate adjustments , HYSAs remain a lower-risk saving option. They work best for those looking to maintain easy access to their funds while earning a competitive return. The rate of growth might vary, but the principal is protected in a high-yield savings account, and the accessibility is typically high, especially with online and mobile access.

The secure framework of HYSAs appeals to long-term savers and newcomers to the saving scene. They provide a relatively safe way to grow funds compared to riskier options like stocks or real estate investments. Hunting for high-yield savings accounts becomes crucial for anyone with monetary goals like preparing for a big purchase, building an emergency fund, or just growing their wealth.

Identifying Your Needs

Your personal financial goals define what you require from a high-yield savings account. So, the first stage in your HYSA search should revolve around identifying your needs.

• Why are you saving?
• What’s your timeline for needing to access your savings?
• Do you need an account that allows multiple withdrawals, or are you fine with restrictions?
• Are you looking for a bank that provides other financial services as well?

These are all pivotal factors to consider before embarking on your hunt for the perfect savings account.

For some, the highest yield might be the sole focus; for others, easy access to funds, customer service, or association with a well-known bank can be higher priorities. For instance, if you’re saving for long-term objectives like retirement, you might be fine with restrictions on withdrawals in a trade-off for higher interest. On the contrary, quick access to money would be crucial if you’re building an emergency fund.

Moreover, consider online banking versus traditional brick-and-mortar banks. Are you comfortable banking digitally, or do you prefer access to in-person customer service? Online banks often offer higher interest rates due to the lower costs linked with digital operations. However, if you’re more comfortable with personal interactions and having access to physical branches, this might moderate your rate expectations. Clearly defining these needs will significantly narrow down your search.

A Hybrid Strategy

One common approach taken by many is what’s widely known as a hybrid strategy. Rather than setting all your money in one savings account, you may split it between several accounts. Having multiple savings accounts can offer several advantages.

For instance, an account offering high interest may have stricter restrictions on withdrawals. In this scenario, you could place the portion of funds meant for long-term savings here while keeping your emergency fund or readily needed money in an account with lesser returns but more flexibility.

Additionally, different banks have specific features and benefits besides interest rates. These can range from advanced banking apps and superior customer service to diversification aspects. However, keep in mind the possible trade-offs like communication complexity and minimum deposit requirements in different banks.

Reviewing the Rate Landscape

With your requirements and strategy in mind, the extensive job of reviewing the current interest rate landscape begins. This step involves researching and comparing the offerings of different financial institutions. Check various accounts’ annual percentage yield (APY) to get the most up-to-date information. The APY is the total amount of interest you’ll earn on your savings annually, considering the effect of compounding.

An easy way to contrast these rates is by checking rate comparison websites like USA Today . These platforms collate information from different banks, credit unions, and financial institutions to give users a comprehensive outlook on available options. However, rates always fluctuate, and the highest one might not always be available when you’re ready to open an account.

Another key point to remember is to look for ongoing rates rather than introductory rates. While banks often attract customers with amplified initial rates, these might decline sharply after the promotional period. Reading the fine print and understanding the true rate of growth is essential to avoid future disappointments.

Assessing Additional Features

Once you’re familiar with the rates, it’s time to scrutinize the additional features of the shortlisted accounts. Beyond APY, unpredictable situations or routine banking needs may shape your experience with an account, and it’s necessary to account for them in your decision process.

Look for the restrictions or fees related to withdrawals, minimum deposit or balance requirements, digital banking features, and customer service quality. You should also consider automated savings options or round-up features. Further, FDIC or NCUA insurance is essential to protect your savings if the bank falls into financial hardship.

Making the Decision

With all the preliminary work done, you’re now in a position to make an informed decision to find the best high-yield savings account for you. Keep in mind that there’s no universally ‘best’ HYSA—each person has unique financial needs and comfort levels, and the most beneficial HYSA represents a match between the offerings of an account and these unique needs.

While making your decision, remember to think critically and not be swayed by the flashy numbers alone. Balance the allure of high returns with the operational realities of the account—restrictions on withdrawals, fees, customer service quality, and so forth. Making a checklist of what you want from the account can help in this part of the process and prevent you from forgetting crucial details.

Finally, remember that opening an account is not a permanent decision. If your HYSA does not match your expectations or your financial needs change over time, there’s always an option to switch. Flexibility is a key part of financial planning , so despite the effort put into finding the best account, be open to revisiting your decision in the future.

Maintaining Your Savings Account

As a final point, obtaining a high-yield savings account isn’t the end of the road. A crucial part of reaping the rewards from your account derives from how you maintain and manage it. Regular savings and knowledgeable withdrawal habits can help maximize interest gains while preventing losses due to fees or rate changes.

Getting to know the bank’s policies about interest calculation and withdrawals is key, as it informs your decisions about deposits and money transfers. Knowing when interest is credited can help you maximize your savings, especially when dealing with larger amounts. Further, keeping an eye on minimum balance requirements can prevent unexpected dipping below the minimum and accruing unnecessary fees.

On a closing note, always keep tabs on the changing interest rates. High-yield accounts are attractive because of their rates, but these are subject to change depending on the broader economic environment. Reassessing the rates from time to time and comparing them against your account’s rate ensures you’re always getting the best deal. Switching accounts may seem a hassle, but it can contribute to higher savings in the long run.

By examining your saving goals, reviewing the rates, understanding additional factors, and maintaining a flexible approach, you can find a high-yield savings account ideally suited to help you grow your savings.