Reflection No. 39

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Welcome to this week’s Reflection, where we’re diving into financial literacy and high-yield savings accounts.

Let’s face it: financial illiteracy is common in the U.S. I don’t have the stats in front of me, but I know that I didn’t really learn about personal finance in high school or college, and chances are, you didn’t either. Additionally, many people are hesitant to discuss money at all.

But one thing that deserves more attention? High-yield savings accounts. They’re one of the easiest ways to make your idle cash work a little harder. Whether it’s your emergency fund or short-term savings, parking your money in a HYSA gives you quick access and earns more interest than a traditional account.

Three Quick Hits:

• Article: Financial Literacy

  Being financially illiterate is hurting your financial future. Even if personal finance isn’t your favorite topic (and you don’t geek out about it like I do), it’s still important to spend at least a little time learning how to manage your money. Reading this newsletter? That’s already a great start.

  Two things stand out:

  1. Younger generations are five times more likely not to have even one month’s expenses saved in an emergency fund.

  2. Financially literate people actually spend less time managing their money because they’ve built good systems and habits.

  Just as investing small amounts consistently can yield significant returns over time, spending even a little time each week on your finances can pay huge dividends. Start small. Stay consistent. Your future self will thank you.

• Tip: Try to learn something new each week—not just about personal finance, but anything. It’s one of the most valuable investments you can make in yourself, and here’s the best part: it can’t be taxed.

• Quote: “There are always reasons why the market is down, and those reasons dominate investor’s consciousness; but current fears are reflected in current prices.” - Bill Miller

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Two Questions:

• Are you building a life that requires more money or one that gives you more freedom?

• If you were managing someone else’s finances exactly like yours, what advice would you give them?

REFLECTION No. 39: High-Yield Savings Accounts

I - Issue: Should you keep your cash in a high-yield savings account or invest it elsewhere?

R - Rule: High-yield savings accounts (HYSAs) offer FDIC-insured interest—currently around 4%—which is significantly higher than traditional savings accounts. However, these accounts are best suited for short-term needs. Over the long term, inflation and opportunity cost can erode the purchasing power of cash.

A - Analysis: We’re living in a rare moment where cash is no longer trash.

Online banks like Ally, SoFi, and Betterment are offering yields of around 4%, significantly higher than the sub-1% rates provided by traditional banks. On the surface, parking money in a HYSA feels like an easy decision. It’s liquid, relatively risk-free, and earning more than it has in years.

However, here’s the catch: Inflation is cooling off, but it still hovers around 3%. That means your real return, after adjusting for inflation, is closer to 2%. Meanwhile, long-term investors in diversified index funds have historically earned 7–10% annually. While that 5% may look appealing, it might not align with your long-term goals.

That doesn’t mean you should ditch your savings account. It depends on what the money is for. Emergency fund? Absolutely—cash is king. House down payment in 12 months? HYSA is probably the best place for it. But if you’re letting your long-term investment dollars sit idle in cash because you’re nervous about the market, you’re likely leaving significant growth on the table.

C - Conclusion: High-yield savings accounts are a great short-term tool. But don’t let the attraction of higher interest rates lull you into cash hoarding. For long-term goals, the market remains the best path to significant growth.