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I know nothing of finance, but I have a normal liquid savings account that's paying 2.25%, apparently "permanently". Why would anyone buy a less-flexible produc

I know nothing of finance, but I have a normal liquid savings account that's paying 2.25%, apparently "permanently". Why would anyone buy a less-flexible product that pays less?

kileywm 7y ago
That high yield savings account is (likely) unavailable to their tax-advantaged account(s) such as 401k. In that case, their choices may be limited to stocks or bonds.
- astura 7y ago
  You can hold CDs in an IRA; currently Navy Federal is offering a 5-Year CD at 3.50% APY available for IRAs with no maximum purchase amount. [1] Earlier this year I opened up an IRA with them and I put $100 in a 3.680% APY 40 months CD. I did this because they were matching the first $100 on new IRAs, so I deposited $100 and they deposited $100. [1] https://www.navyfederal.org/products-services/checking-savings/certificates.php https://www.navyfederal.org/products-services/checking-savin...
dragontamer 7y ago
> normal liquid savings account that's paying 2.25% Yes. That's what an inverted yield curve means. Liquid funds are "more expensive" than long-term funds. That's why things are inverted right now. The long-term expectation (over the course of the next 10 years) is that savings accounts will drop. That's why people are willing to "only" be paid 1.6% for a 10-year, because its better to be paid 1.6% for 10 years... rather than 2.25% for this year (and then only 0.5% for the next 9 years). In essence: the bankers are taking the opposite bet you're making. When the bankers are making a move, you probably should think about the future of money... bankers probably know more than you and I do. EDIT: > Why would anyone buy a less-flexible product that pays less? Because they have a pessimistic view of the next 5 to 10 years. When big-money starts to make these pessimistic bets, its a recession indicator.
scott00 7y ago
It's not actually permanent. Your bank almost certainly has the right to change it daily, and once their asset acquisition goals are met, they probably will.
pb7 7y ago
It's not permanent, it fluctuates with the Fed's interest rates.

I know nothing of finance, but I have a normal liquid savings account that's paying 2.25%, apparently "permanently". Why would anyone buy a less-flexible product that pays less?

kileywm 7y ago

That high yield savings account is (likely) unavailable to their tax-advantaged account(s) such as 401k. In that case, their choices may be limited to stocks or bonds.

astura 7y ago
You can hold CDs in an IRA; currently Navy Federal is offering a 5-Year CD at 3.50% APY available for IRAs with no maximum purchase amount. [1] Earlier this year I opened up an IRA with them and I put $100 in a 3.680% APY 40 months CD. I did this because they were matching the first $100 on new IRAs, so I deposited $100 and they deposited $100. [1] https://www.navyfederal.org/products-services/checking-savings/certificates.php https://www.navyfederal.org/products-services/checking-savin...

dragontamer 7y ago

> normal liquid savings account that's paying 2.25% Yes. That's what an inverted yield curve means. Liquid funds are "more expensive" than long-term funds. That's why things are inverted right now. The long-term expectation (over the course of the next 10 years) is that savings accounts will drop. That's why people are willing to "only" be paid 1.6% for a 10-year, because its better to be paid 1.6% for 10 years... rather than 2.25% for this year (and then only 0.5% for the next 9 years). In essence: the bankers are taking the opposite bet you're making. When the bankers are making a move, you probably should think about the future of money... bankers probably know more than you and I do. EDIT: > Why would anyone buy a less-flexible product that pays less? Because they have a pessimistic view of the next 5 to 10 years. When big-money starts to make these pessimistic bets, its a recession indicator.

scott00 7y ago

It's not actually permanent. Your bank almost certainly has the right to change it daily, and once their asset acquisition goals are met, they probably will.

pb7 7y ago

It's not permanent, it fluctuates with the Fed's interest rates.