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

Traditionally, the main benefit of a savings account is risk-free savings. You put your reserve money into it each month, earn a small amount of interest, and rest assured that it will be there when you need it. However, that might be about to change, with a new initiative from a Fintech company called Current offering a savings account with 4% APY.

Current’s savings account is making waves in offering a 4% annual percentage return (APY) on savings up to $6,000. This is in comparison to the 0.13% offered with most types of savings accounts. You earn risk-free money in what is called a savings capsule.

How does this work?

Current is a unique company, in that it essentially offers a banking and payment service that differs from both traditional banks and modern money transfer startups. You can get different types of accounts on apps like PayPal and Payoneer, but they don’t offer anything like Current.

Their most exciting product is their bank account which comes with savings capsules. These accounts are open to consumers free of charge and do not require any Credit check. They just use your social security number to confirm your identity.

You get 3 savings modules, each with a maximum amount of $2,000 and a fixed APY of 4%. It’s a great way to start growing your money before you’re ready to risk a lot of money.

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 make actions redundant?

A 4% APY is quite heavy, and many people trying to trade stocks fail to achieve these kinds of returns on a regular basis. But that doesn’t mean you have to give up your stock portfolio.

Current’s main limitation is maximum savings. Currently, you can save up to

$6,000 on your savings modules with a 4% return. While $6,000 might seem like a lot when you start your savings journey, it won’t take most clients too long to reach the limit.

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

In other words, while you should definitely enjoy a 4% APY, that shouldn’t be all in your wallet. How should this work?

Enjoy a 4% APY

The reality is that a 4% APY on $6,000 is big but it won’t make you rich. Nevertheless, it is certainly an offer that you can take full advantage of. By keeping $6,000 in your savings capsules, you can make good returns every year without doing any work.

Hopefully that’s not all the savings you have. Savings that exceed your $6,000 limit can add up to a lot of money in a stock trading portfolio that you actively maintain on a daily basis. This way, you earn the same money as you would with 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 continue your quest for real wealth.

In theory, 4% APY on your savings could be a big investment. However, you won’t get that kind of deal on huge sums of money. Stock trading remains an important way to build your wealth.

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James V. Hayes