Earn 4.5% interest on your savings. This is the way.

Unless you have been living under a rock, you know that everything is more expensive, your investments are down, and interest rates for a loan have skyrocketed. Oh, and to top it all off, you’re earning a measly 0.39% interest on your savings. In addition, your money is depreciating as it sits in the bank due to high inflation!

Enter Betterment Cash Reserve; keep reading to find out more.

Betterment Cash Reserve

Betterment is an online investment platform that offers a one-stop shop for easy investing and savings. I started using Betterment in 2015. I was new to investing, and their robo-investor platform helped me take my first leap into investing in the stock market.

In 2019, Betterment launched Cash Reserve, a high-yield savings account that is FDIC-insured up to $2 million ($4 million with a joint account), which means your money is safe. Betterment is not a bank. They actually work with multiple banks and spread your money across those banks. This is how they can achieve FDIC insurance of $2 million as opposed to the typical $250,000. This is something you could do on your own, but it would be more confusing than just having it on one app.

How to Earn 4.5% Interest on Your Savings with Betterment Cash Reserve

I know what you’re thinking. “Ok, what’s the catch? Must be a high minimum balance, or I’m going to have to lock up my money to get this rate?”. The simple answer is nope, there’s no catch.

The Fed has increased interest rates ten times over the past year to combat inflation. This has caused credit card interest to skyrocket to 20%, a debt disaster you must extinguish now if you have it. Banks can charge more interest for loans too. The increased interest rate is your cut from allowing a bank to lend out your money, which you do when you put your money in a savings account.

Betterments rate is much higher than your major bank because they use online banks. An online bank has significantly fewer employees because they don’t have physical branches. Having no physical branches also means no lease or utility payment. They can offer a higher interest rate because of this. Don’t worry. This isn’t some crypto scheme. These are legitimate banks that the FDIC fully insures.

Screenshot of the app showing separate saving categories

Benefits of Betterment Cash Reserve

  • Betterment has an easy-to-use app. If you choose to use their automated investment product, you’ll be able to see an overview of all your money in one place. You can also have them track your net worth. Unfortunately, the app is less robust for this feature than other apps dedicated to net worth tracking. It does give a concise overview, though, which is nice.
  • A great feature is that you can categorize the money. For example, I have tax, car insurance, and vacation categories. With each of these, I set a different recurring deposit. It makes saving for something specific easy.
  • As mentioned, Betterment offers FDIC insurance of $2 million. Although, I’m unsure why anyone would keep $2 million in a savings account anyway. I only keep $20,000 in my emergency fund. Much less than recommended 6-12 months of income a financial advisor will suggest. You can see why here.
  • Easy transfers through ACH. It typically takes a day or two to get my money back to my main bank account when I initiate a transfer
  • 4.5% interest. Of course, this is the major benefit. There’s no lock up or minimum you have to put in. However, this rate can always fluctuate.

Drawbacks of Betterments Cash Reserve

  • No physical branches. Betterment is an online-only platform, so if you prefer face-to-face interaction then this might not be a good option for you.
  • Unable to get your cash instantly. You’ll have to wait a day or two to get your cash. It’s really not a big deal but if you’re a poor planner it might be a problem for you.

The Bottom Line

Overall, the Betterment Cash Reserve is an excellent option to earn a high-interest rate on your emergency fund. I personally have used Betterment since 2015 and have been using cash reserve for a year now. However, remember to consider some of its limitations, such as the lack of physical branches. As always, read the terms and conditions carefully before signing up for any financial product and determine if it suits your investment goals.

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